French asset manager Amundi and alternative data specialist Preqin have partnered to produce a research on the alternative assets markets in Europe.
As of 30 September 2017, Europe-based alternative assets under management reached €1.48trn, having grown by 8.8% year-on-year from €1.37trn.
Among alternatives, some €601bn were in hedge funds (40.6% of all alternative assets in Europe as of September 2017), €507bn in private equity, €131bn in infrastructure, €106bn in real estate, €108bn in private debt and the remaining in natural resources.
Country-wise, the UK gathered 51.8% of alternative assets in Europe, followed by France (8.6%), Sweden (5.3%), Switzerland (3.5%) and Germany (3.1%) at the end of September 2017.
Mixed news for hedge funds
Data analysed around hedge funds by Amundi and Prequin suggests mixed news for the hedge fund industry, remaining the largest alternative asset class used in Europe with €404bn of total capital invested by 1,101 Europe-based hedge fund investors in 2018.
It shows Europe-focused hedge funds have outperformed all hedge funds and public market indices by 6.33% over a five-year annualised period. Nonetheless, they have underperformed the rest of the market by 8.21% in Q1 2018.
Regarding Europe-based hedge funds’ net inflows, they amounted to €26.9bn over last year in contrast of the €32.7bn outflows observed in 2016. 52% of Europe-based hedge fund managers saw net inflows over Q1 2018 but despite this, outflows of €8bn were reported at the same time.
Preqin’s chief data officer Elias Lastis noted that the hedge fund industry is evolving as for the first time in 2017, liquidations of Europe-based hedge funds exceeded launches (190 liquidations against 179 launches). The trend is likely to pursue in 2018, he added.
Other findings see Sweden as the second largest hedge fund market in Europe in AUM terms (€36bn), far behind the UK (€355bn) and just before France and Switzerland with €29bn and €25bn of local investors’ assets invested in hedge funds respectively as of end March 2018.
The study also focuses on top performing hedge funds by country in Europe (see table below).
| Country | Top performing hedge fund | Company | 3-y annualised return (as of March 2018) |
|---|---|---|---|
| UK | Japan Synthetic Warrant Fund – USD Class | Dejima Asset Management | 34.21% |
| Switzerland | Teleios Global Opportunities fund | Teleios Capital Partners | 21.94% |
| Germany | Wermuth Eastern Europe L/S strategy | Wermuth Asset Management | 11.77% |
| Netherlands | Mint Tower Arbitrage Fund | Mint Tower Capital Management | 6.50% |
| Italy | Finint Bond Fund – Class A | Finanziaria Internazionale Investments | 7.44% |
| France | Orsay Merger Arbitrage Fund – USD Share Class 3 | Oddo BHF Asset Management | 11.21% |
| Sweden | Gladiator Fund | Max Mitteregger Asset Management | 13.99% |
| Spain | Ben Oldman Special Situations Fund | Ben Oldman Partners | 9.74% |
| Norway | AAM Absolute Return Fund – Class B (NOK) | Oslo Asset Management | 23.59% |
| Denmark | Danske Invest Hedge Fixed Income Strategies Fund – EUR | Danske Invest | 10.19% |
Source: Preqin, Amundi, 2018
Private capital on the rise
Detailing results on European private capital (private equity, private debt, real estate, real assets), Preqin’s chief data officer Elias Latsis pinpointed capital distribution exceeds capital called-up since 2013. All-time high €183.9bn net inflows and 363 funds closed were recorded in private capital during the nine first months of 2017. This is 3.7 times higher than the low point reported in 2010 (some €49.6bn were raised) and 1.8% higher than in 2016.
In Q1 2018, Preqin estimates some €53.2bn in net inflows have been raised in the private capital space. Another record hit in the private capital field was seen in the number of deals completed last year (6,314; up 7.4% from 2016) for a total amount of €507bn. However investors have expressed concerns on asset valuations, in particular in the private equity segment.
Europe-focused private equity’s fundraising has plummeted over last year to €95.5bn from €109.8bn in 2016 (-13% yoy). Prequin-Amundi’s research has found out that strong returns are delivered by the asset class but the gap is widening between top and bottom performers. Some €29.6bn have been raised in Q1 2018 in this segment the study assesses.
Moreover it highlights, 81% of France-based investors allocate to private equity, the largest proportion allocating to any asset class, while 89% of Spain-based investors operate similar allocation.
| Country | Largest local private capital fund | Company | Funds raised at final close |
|---|---|---|---|
| UK | M&G UK Companies Financing Fund | M&G Investments | €1.8bn (closed in December 2014) |
| Switzerland | UBS Clean Energy Infrastructure Switzerland | UBS | €330m (closed in October 2014) |
| Germany | Patrizia Wohnmodul I | Patrizia Immobilien AG | €2bn (closed in September 2011) |
| Netherlands | Bedrijfsleningenfonds | Netherlands Investment Institution | €960m (closed in March 2017) |
| Italy | Fondo investimenti per l’arbitrare | CDP Investimenti | €2bn (closed in March 2012) |
| France | France Investissement III | Bpifrance Investissement | €2bn (closed in April 2012) |
| Sweden | Ariem Fund II | Andersson Real Estate IM | €320m (closed in July 2013) |
| Spain | Portobello Capital Fund IV | Portobello Capital | €600m (closed in February 2018) |
| Norway | Pareto Property Partnership IS/AS | Pareto Asset Management | €245m (closed in December 2014) |
| Denmark | Seed Capital Denmark III K/S | Seed Capital | €819m (closed in April 2016) |
Source: Preqin, Amundi, 2018
Real estate and assets’ inflows soaring
Real estate flows analysed by Amundi and Preqin demonstrated that Western European and North American investors were increasingly investing in multi-regional funds and that aggregate capital raised has been soaring since 2015 (€29.9bn raised over 2017).
Among European investors that allocate the most to real estate, Italy comes first (79% of investors allocating to real estate) followed by Norway (76%), Switzerland (75%) and Sweden (74%).
As for infrastructure, Europe-focused unlisted natural resources have hit a record with €16.4bn aggregate capital raised in 2017, exceeding by 65.7% the previous high set in 2015 (€9.9bn). Unlisted renewable energy fundraising also set a new aggregate capital mark at €8.2bn last year.
Trends
Speaking at a media briefing in London, Amundi’s global head of Real and Alternative Assets Pedro Antonio Arias highlighted that the data gathered with Preqin will support the education of clients on alternatives.
“If we want to educate clients, we need to offer beta on top of returns and to provide data. There is a large amount of cash that still wait to be invested. A new way to invest in alternatives is to tackle the ramp up issue by reducing the ramp up period,” he said.
According to Arias, alternative asset managers are now teaming up with industrial partners to produce the asset together therefore access to the opportunity is exclusive to the manager’s clients. Amundi real assets chief quoted BlackRock and Google which recently partnered in the building of a storage center.
He added private debt was a “promising” asset class with a similar profile to fixed income, the only limit remaining the liquidity issue.
Asked about P2P lending, Mark O’Hare, CEO of Preqin, said the firm looked at the new alternative asset class but even though returns look appealing and opportunities will arise in this field, evidence is not there yet, especially regarding default rates.
The study is available here.
