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European alternatives industry approaches EUR1.50tn in AUM

Total assets under management for the alternative assets industry in Europe reached a record EUR1.48 trillion as of September 2017, according to a new report from Amundi and Preqin.

Growth has been driven by strong inflows of capital: Europe-focused private capital funds – including private equity, private debt, real estate and real assets – secured a record EUR184bn in 2017, having seen annual totals increase every year since 2011. At the same time, 52 per cent of Europe-based hedge fund managers saw net inflows in 2017 – the highest proportion of any region – as the industry recorded EUR27 billion in net capital inflows.
Fundraising activity has been supported by strong long-term performance compared to other investments. Europe-focused hedge funds posted average annualised returns of 6.33 per cent in the five years to the end of March 2018, significantly above the 1.94 per cent posted by the FTSE 100 in the same period. Private capital funds focused on the region, meanwhile, have returned an average of 14.7 per cent in the five years to September 2017, higher than either North America- (13.1 per cent) or Asia- focused (12.5 per cent) funds.
Europe has a rich and evolving alternative assets ecosystem, with over 5,700 fund management firms and 2,800 institutional investors overseeing investments across private equity, private debt, real estate, infrastructure, natural resources (collectively termed ‘private capital’) and hedge funds.
Mark O’Hare (pictured), Chief Executive – Preqin, says: “With a mix of mature and emerging economies, and an evolving social, political and regulatory environment, the European market for the alternative assets industry requires careful navigation. Certainly, European alternatives are in rude health, and the prospects for growth are good: more than 2,800 investors in the region allocate to one or more alternative asset classes, and assets based in the region are nearing EUR1.50tn.
“But the coming years won’t be without challenges, particularly in the face of more stringent regulation, as well as the end of quantitative easing and its impact on the availability of financing. Now more than ever, investing in Europe requires expertise and judgement to materialise its promised rewards.”
Pedro Antonio Arias, Global Head of Real and Alternative Assets – Amundi, says: “It is no longer just European banks and governments that are providing funding for the real economy: insurance companies and pension schemes are also playing their part. The popularity of alternative investments among pension schemes and insurance companies is well understood: the unconventional monetary policies developed in response to the Global Financial Crisis had a significant impact on all asset classes.
“Real assets are appealing to long-term investors for three reasons: they allow such investors to capture an illiquidity premium; they enhance income through a source of predictable returns; and they create diversification, as they have low correlation to traditional asset classes.”

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