Preqin and Amundi publish 2020 annual Alternative Assets in Europe report
Wednesday 28 October 2020
Published in partnership with Amundi for the third consecutive year, the Preqin 2020 Alternative Assets in Europe report looks at developments in the alternative assets industry in the main European markets and the determining factors behind them.
Initiated by Amundi in 2018, this major annual study dedicated to alternative investments in Europe (real estate, private equity, private debt, infrastructure and hedge funds) reveals that the industry’s growth is not slowing despite the difficult context linked to the COVID-19 pandemic.
Growth of the European alternative assets industry
According to the report, Europe-based alternative asset managers managed a total of €2 trillion in assets at the end of December 2019; private equity (€795 billion) and hedge funds (€609 billion) being the two biggest asset classes in this market. The growth of the European alternative assets industry has been impressive, with an increase of more than €200 billion in just 12 months. Total assets under management grew by 44% between December 2015 and December 2019. Europe now accounts for 21% of the global industry. It has 6,900 fund managers and is supported by nearly 3,000 institutional investors.
The impact of COVID-19
As with the financial sector as a whole, the COVID-19 pandemic has caused significant market disruption in Europe, with a direct impact on fundraising and dealmaking since the beginning of the year. While activity has not reached the levels seen in recent years, alternative funds nevertheless continue to raise significant amounts of capital and managers continue to invest them, still buoyed by strong investor appetite for these asset classes.
Indeed, alternative assets are seen as a way of diversifying portfolios and reducing their volatility. More generally, the risk-adjusted return outlook remains attractive in a universe of persistently low interest rates and a volatile equity market.
Despite the upheavals, 2020 is still likely to prove a very good year for the alternative assets industry in Europe. Mega-acquisitions such as the sale of Thyssenkrupp Elevator AG for €17 billion pushed the total value of buyout deals in the region up to more than €42 billion in the first half of the year, while venture capital investments approached €13 billion. Private debt funds in Europe experienced strong growth, raising €21 billion in the first half of the year. Investors sought to take advantage of potential anti-cyclical investments. Private equity fundraising was stimulated by an increase in secondary funds. Ardian and Lexington Partners were among the companies that closed mega-funds in the sector.
On the other hand, real estate and infrastructure have experienced a greater decrease in deal closing. Private real estate deals in Europe totalled €22 billion in the first half of 2020, compared with €82 billion in 2019 and €120 billion in 2018. Infrastructure deals are also down, from €170 billion in 2018 to €40 billion in the first half of 2020. Fund managers report that the logistical challenges posed by the COVID-19 pandemic have made due diligence and deal origination much more difficult. But even so, fundraising activities have been strong. This suggests that activity will rebound as social distancing restrictions are gradually lifted throughout the continent.
France and Germany stand out
The European alternative asset landscape is as complex and dynamic as the countries within it. Although the UK commands over half of all assets in Europe, other countries such as France and Germany are growing in influence.
France is the largest alternative assets market in continental Europe. In the first half of 2020, several factors should be noted. The creation of Vauban Infra Fibre (for €4.3 billion) brought total infrastructure investments in the country to €6.5 billion, more than for the whole of 2019. And France was once again the most active market in Europe for private debt, with €1.3 billion in deals in the first six months of the year, compared with €0.7 billion for the whole of 2019.
Germany, meanwhile, has been one of Europe's most active private equity markets: it recorded €34 billion in deals in the first half of 2020, eclipsing even the UK's €31 billion. Private equity and infrastructure in particular are responsible for most of the activity, with total deals in 2020 expected to exceed 2019 figures despite the COVID-19 disruption.
“Europe faces significant challenges in restructuring, reforming, and growing its economies,” said Preqin CEO Mark O'Hare. “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. This report aims 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,” added Dominique Carrel-Billiard, Global Head Real and 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 signs of slowing down.”
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