European alternatives funds surpass EUR2tn AUM threshold for the first time
Total assets under management for Europe-based alternatives funds have reached EUR2.00 trillion for the first time as of the end of 2019, according to Preqin's 2020 Alternative Assets in Europe report, produced in partnership with leading European asset manager Amundi.
This is up from EUR1.79 trillion at the end of 2018, and EUR1.39 trillion at the end of 2015.
The UK is the largest market, with EUR1,180 billion in AUM, followed by France (EUR242 billion); since the beginning of the year, Germany overtook the UK as the most active private capital market by total deal value for the first time.
Covid-19 has dampened activity across the region, but the industry remains robust and vibrant, and there are indications that activity may rebound as restrictions are lifted.
The report finds that Europe-based alternative asset fund managers now hold EUR2.00 trillion in assets under management as of December 2019, with the private equity (EUR795 billion) and hedge fund (EUR609 billion) sectors making up the majority. The growth of the European alternatives industry has been impressive, with an increase of more than EUR200 billion in just 12 months. In fact, AUM has grown by 44 per cent between December 2015 and December 2019, and Europe now accounts for 21 per cent of the global industry. This is overseen by a manager universe of more than 6,900 firms and backed by almost 3,000 institutional investors in the region.
As with the wider financial landscape, the Covid-19 pandemic has caused significant disruption to the alternatives industry in Europe, with fundraising and dealmaking being directly impacted since the start of the year. But while activity is not at the record highs we have seen in recent years, funds are continuing to raise capital and managers are putting money to work, as investor appetite remains strong. Alternative assets are seen as portfolio diversifier and volatility dampener, and overall as a source of appealing risk-adjusted returns in a world of persistently low interest rates and volatile equities.
Despite the disruption, therefore, 2020 has been another active year for the alternatives industry in Europe. Mega acquisitions such as the EUR17 billion sale of Thyssenkrupp Elevator AG have spurred total buyout deal values across the region to more than EUR42 billion in H1, while venture capital investment approached EUR13 billion. Private debt funds in Europe have seen a rush of capital, raising EUR21 billion in the first half of the year as investors seek to take advantage of potential counter-cyclical investments. Private equity fundraising has been driven by an uptick in secondaries, with Ardian and Lexington Par trillioners among those firms closing mega funds in the sector.
Real estate and infrastructure have seen a more significant decline in dealmaking. PERE deals in Europe totalled just EUR22 billion in H1 2020, down from EUR82 billion in 2019 and EUR120 billion in 2018. Infrastructure deals have similarly fallen from EUR170 billion in 2018 to EUR40 billion in the first half of 2020. Fund manager report that the logistical challenges brought on by the Covid-19 pandemic have made due diligence and deal origination much more challenging. But even here, fundraising activity has been strong. This suggests that activity could rebound as social distancing restrictions are lifted across the continent.
The European alternative landscape is as complex and dynamic as the countries within it. Although the UK commands over half of all assets in Europe, we are seeing other countries such as France and Germany growing in influence.
France is the largest alternative assets market in mainland Europe, and in H1 2020, there have been some bright spots. The EUR4.3 billion creation of Vauban Infra Fibre took total infrastructure investments in the country through H1 2020 to EUR6.5 billion, outpacing the whole of 2019. And France has once again been Europe’s most active private debt dealmaking market, recording EUR1.3 billion in deals in H1 2020, compared to EUR0.7 billion in the whole of 2019.
Germany, meanwhile, has been one of Europe’s most active private capital markets – it has seen EUR34 billion of deals recorded in H1 2020, eclipsing even the UK’s EUR31 billion. Private equity and infrastructure in particular are responsible for the bulk of activity, with total deal values in 2020 set to exceed 2019’s figures despite the Covid-19 disruption.
“Europe faces significant challenges in restructuring, reforming, and growing its economies,” says Mark O’Hare, Preqin CEO. “The good news is that alternative assets can play a valuable role in helping to unlock the region’s potential. Europe has a dynamic and successful industry, fully equipped and ready to meet the changing needs of all stakeholders. Efforts like this report aim to help shed light on developments across these key sectors, and we are delighted and honoured to work in partnership with industry leaders like Amundi to produce such a comprehensive and in-depth study.”
“It is encouraging to see that despite the significant challenges of the Covid-19 pandemic, the allocation of capital to alternative asset classes continues to gather momentum,” adds Dominique Carrel-Billiard, Global Head of Real & Alternative Assets at Amundi. “Our investors are showing increased appetite for private equity, private debt, real estate and infrastructure, whether through funds or alternative multi-management solutions. We believe the crisis will create a number of opportunities in alternative assets as the economy rebounds, and European investors are watching this closely. We see our partnership with Preqin in producing such an important study as playing a vital role in bringing more transparency and education on European private markets at a time when the growth of this industry shows no sign of slowing down.”