Democratization of Private Assets Set to Continue in Europe

May 8, 2023 — London

Macro-economic conditions will not slow allocations, but there are challenges

Allocations to private assets by Europe’s high-net-worth (HNW) and ultra-high-net-worth (UHNW) investors will continue to grow, spurred on by product innovation, but the increase in exposure will be uneven across wealth groups, according to the latest Cerulli Edge―Europe Edition.

The research indicates that most HNW and UHNW investors remain well under-allocated to private assets and so will continue to expand their private asset programs. It identifies semi-liquid funds and European Long-Term Investment Funds (ELTIFs) as two of the areas that present opportunities for asset managers. Demand for private equity and infrastructure funds from private banks and their clients will remain strong, but their demand for real estate is expected to decrease over the next 12 to 24 months.

There are, however, challenges to be overcome. Nearly half of the private banks and wealth managers indicate that a lack of liquidity, high fees, and clients’ risk aversion are the top concerns preventing them increasing private investments within their clients’ portfolios.

“The democratization of private assets faces several challenges, but Cerulli believes that more permissive regulation, client education, and new technologies will help to address some of these over the next three to five years,” says Justina Deveikyte, director, European institutional asset management research.

Semi-liquid funds are gaining popularity, especially in the U.K., Switzerland, and Italy. Half of the U.K. wealth managers favor semi-liquid funds when investing in private markets. In Italy and Switzerland, around 40% of private bank and wealth managers show a strong preference for semi-liquid structures. Cerulli anticipates an increasing number of semi-liquid fund launches over the next 12 to 24 months.

ELTIFs are also attracting increasing interest. 45% of private banks and wealth managers across Europe want to increase their exposure to infrastructure ELTIFs over the next 12 months and around 40% want to invest more in real estate ELTIFs. Demand is strongest in France, Switzerland, and Italy.

“A revision of the ELTIF regulation, which is expected to take effect in 1Q 2024, will allow investment in fund-of-funds and master-feeder structures and remove the minimum-net-worth requirement, as well as the €10,000 entry ticket. The update will likely be a catalyst for the launch of many more ELTIFs over the next 12 to 24 months. Asset managers considering launching ELTIFs should not delay,” says Deveikyte.

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Note to editors

These findings and more are from The Cerulli Edge―Europe Edition, 2Q 2023 Issue.

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