Investors look to increase allocations to private debt
45 per cent of institutional investors plan to increase allocations to private debt over the next 12 months, alongside 51 per cent who plan to increase longer-term allocations, new research has found.
An investor survey from data and research firm Preqin, cited in its Alternatives in Europe report, said that these are higher proportions than for any other asset class.
“Amid a tightening monetary environment, one asset class is an increasing priority for investors integrating alternatives into their portfolios,” Preqin said. “Private debt is the only one on the right side of tighter credit markets given many funds’ exposure to higher rates through variable lending facilities.
“This popularity no doubt contributed to record fundraising in 2022 by Europe-based managers, when 53 funds secured €52.1bn (£44.5bn) in capital.”
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The research also showed that European private debt fundraising is dominated by UK-based fund managers.
Fundraising to early June 2023 by private debt Europe-based fund managers came in at €9.6bn. The UK takes up the lion’s share of the market, securing 90 per cent of the capital despite accounting for only 53 per cent of the 15 funds closed so far this year.
Preqin’s report also found that the combined assets under management (AUM) of European alternatives stood at €2.95tn as of September 2022.
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Of this, the UK and Western Europe both surpassed €1tn of private capital AUM in 2022, although the UK’s share has fallen to a new low of 44 per cent of the total.
“Alternatives have become crucial for financing companies and investing in the built environment in Europe,” said Alex Murray, VP, head of real assets, research insights at Preqin.
“Practices that emerged in the North America market have been embraced and adapted to suit the diverse requirements of European economies and institutional investors. The adaptability of alternatives will be no less crucial in the coming years, as risks emerge for Europe’s continued economic prosperity.”
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