Europe-based assets under management comprises less risk compared with North America through broader private debt and infrastructure exposure.
Preqin, a global leader in alternative assets data, tools and insights, has published its Alternatives in Europe 2024 report which shows that European private equity fundraising reached €118bn in the first half of 2024 and could be on track for a record year. However, there are signs a slowdown is due in the second half of the year.
Preqin forecasts also highlight that capital targeting Europe is set to have lower growth from the end of 2023 to 2029 compared with North America. While Europe may lose ground to North America in future years from lower relative growth in assets under management (AUM), Preqin sees the growth profile of Europe as containing greater certainty, or lower risk, owing to the region’s broader exposure to the lower-risk asset classes of private debt and infrastructure.
Anticipation of falling rates gives private equity momentum, while decelerating that of private debt
As the European Central Bank’s policy rates start to fall in Europe, the report highlights the potential impact on private equity and private debt fundraising.
Looking to Europe-based private equity fundraising, fund managers raised €118bn in the first half of 2024. If the second half of the year were to replicate this pace, it would be a record year with €236bn secured, 30% higher than the previous record of €181bn in 2018. Private equity’s success has been partly driven by Nordic-based managers who secured more capital in the first half of the year than in any other previous whole year.
However, capital targeted by Europe-based private capital funds in market dropped in the first half of the year, from €812bn to €760bn, mainly driven by a decline in private equity funds. As fewer mega funds are raising in that asset class, fundraising’s pace may slow in the second half of 2024.
Meanwhile, Europe-based private debt fundraising decelerated with €14bn raised in the first half of 2024, compared to €103bn cumulatively in 2022 and 2023. In the first half of 2024, UK-based private debt funds raised €6.9bn, West Europe-based managers €5.3bn and Nordic-based managers €1.7bn.
European AUM growth underpinned by lower-risk asset classes
Preqin data shows that Europe’s share of alternatives AUM was almost €3.3tn, or 20.9%, of the global total, by the end of 2023. Based on Preqin’s most recent forecast for the global alternatives industry, Europe’s share of AUM is expected to contract to 20%, or €5.5tn, by 2029 due to lower forecast performance and a slower pace of fundraising compared to North America, the dominant region.
While European AUM growth may be lower than North America, the region demonstrates a lower-risk AUM profile, with higher shares of private debt (15.3% of Europe’s private capital AUM) and infrastructure (18.9% of Europe’s private capital AUM) compared with North America’s 12.4% and 7.5%, respectively.
Alex Murray, vice president and head of real assets and research insights at Preqin, said: “The anticipated reduction in interest rates is a driver of both the acceleration of private equity and deceleration of private debt given their contrasting prospects in a looser monetary policy environment. The fervour for private debt seen over recent years may be showing signs of slowing down in Europe, in line with market expectations for prompter rate cuts compared with North America.”
Click here for details of how to download the Alternatives in Europe 2024 report.
