LONDON, Oct. 03, 2024 (GLOBE NEWSWIRE) -- Preqin, the global leader in alternative assets data, tools, and insights, published its Alternatives in Europe 2024 report. The report shows that European private equity fundraising reached €118bn in the first half of 2024 and could be 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: 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 – the latest data available*. 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, VP, Head of Real Assets, Research Insights at Preqin, says, “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 fervor 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.”
Additional key findings include:
- Europe buyout discount nears 10%: Europe buyout deals show a persistent discount compared with North America, with entry EV/EBITDA consistently lower between 2018 and 2023. Preqin Transaction Intelligence data reveals an average 9.8% discount over the period, with discounts rising substantially in the information technology and industrial sectors in recent years.
- Actual performance against targets varies by asset class: Preqin data shows private debt 2018–2021 vintages outperformed managers’ expectations, as post-pandemic contractionary monetary policy drove tighter credit conditions. Conversely, venture capital and real estate performance in similar vintages fell below targets in the face of continuing valuation pressures.
- Open-ended fund launches and private wealth’s access to alternatives: The trend of enhancing alternatives access to high-net-worth investors underpins strong growth in European Long-term Investment Fund (ELTIF) and UK-specific Long-term Asset Fund (LTAF) structures. Preqin data shows that 125 ELTIFs and 13 LTAFs had launched, as of August 2024. Of the 125 ELTIFs, 84 are domiciled in Luxembourg, 20 in France,11 in Italy, 7 in Ireland, and 3 in Spain.
Notes to editor
*Preqin has a six-month lag in its AUM analysis to ensure it has as complete a dataset as possible when calculating values.
**Figures cited from Preqin’s Future of Alternatives 2029 report.
If you would like more information or would like to speak with the report author, please contact Oliver Keyser at oliver.keyser@preqin.com
About Preqin
Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for over 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.
