Even though interest rates have been rising, institutional investors continue to show interest in alternative investments. Sofia Harrschar, Head of Alternative Investments and Structuring at Universal Investment Group, explores the evolving dynamics of the market and highlights key opportunities in private credit.
In its capacity as Super ManCo, Universal Investment currently manages a volume of about €94bn in alternative investments, in particular for institutional investors. How is this volume distributed across different structures?
Simply put, it’s spread across all asset classes in private market investments, mainly private equity, private debt, and our securitisation structures. The most significant and consistent growth on our platform has been private equity, followed by private debt structures.
Does the changed interest rate environment affect investment decisions for alternative investments?
Investment appetite in alternative investments remains stable, and the trend towards investing in private markets is ongoing. There continues to be a notable interest in investments that provide regular returns over their duration, such as private debt. We are observing though, that at institutional investors are paying more attention to the investment strategy. There’s a renewed focus on investing in domestic regions – a stronger home bias. Interest in more exotic regions has decreased.
Is there a shift to fixed income?
To speak of a shift isn’t quite accurate for such varied asset classes. Alternative investments are inherently illiquid, which dictates a different approach. The decision-making process for investors starts much earlier. The amount of the investment volume is also crucial. The costs incurred in alternative investments need to be proportionate to the investment volume. This has always been and continues to be a key consideration. At present, fixed income is becoming a viable investment option again, particularly for investors with smaller volumes.
What are the strengths of Universal Investment in alternative investments?
As a fund service platform, we have extensive experience in structuring of Private Markets Funds as well as a clear understanding of Alternative Investments as an asset class. Our focus lies with the investors’ needs which enables us to find tailored solutions. As we are acting as AIFM and/or Fund Administrator, we get to be part of these projects over the full lifetime of the product. This provides a genuine source for innovation.
Operating platforms in Luxembourg, Ireland, and Germany gives us a unique position to provide these services. We are the leading third-party ManCo and third-party AIFM in Luxembourg and are a frontrunner in Germany. We see a lot of interest coming into Ireland from US managers.
What opportunities do you see emerging for private credit firms in the near future?
Private credit firms are poised to benefit from emerging economic opportunities. This includes growing financing needs in areas like infrastructure, particularly in power grids. The communications sector, fueled by the digital revolution and data technology advancements, also shows promise. Furthermore, innovative technologies like artificial intelligence, renewable energy, and biotechnology offer substantial investment possibilities. Real estate continues to be a key focus, especially in North America and Asia, as highlighted by our latest institutional investor survey.
Sofia Harrschar, PhD, Executive Director and a Member of the Management Board, Universal Investment Group – Sofia oversees the Alternative Investments & Structuring department at Universal Investment Group. Her responsibilities encompass managing investments in private equity, loans, and securitisation, along with the structuring and implementation of complex investment projects on the Group’s German and Luxembourg platforms.Sofia holds a degree in business administration from the JW Goethe University in Frankfurt, Germany, where she also earned her doctorate in finance. Prior to her tenure at Universal Investment, she gained significant experience at Dresdner Kleinwort Benson and Prime Capital. With over 20 years in the industry, Sofia is a highly esteemed and experienced expert in the field.
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