Assets invested in European alternatives have nearly doubled in the past seven years, and will continue to grow, according to a Preqin report released Sept. 9.
The 2022 report also found Western Europe overtaking the U.K. as the largest manager base for those assets.
At the end of December 2021, assets managed by private capital funds focused on Europe were €2.2 trillion ($2.5 trillion), compared with €1.3 trillion in December 2015, Preqin said. By the end of 2026, private capital assets in Europe could reach €4.9 trillion, representing a 14% compound annual growth rate since 2021.
Infrastructure and private debt in Europe are forecast to experience the strongest growth in overall assets under management between 2021 and 2026, with compound annual growth rates of 24% and 19%, respectively, Preqin said.
Private equity is likely to remain the largest asset class, reaching 43% of private capital in Europe in 2026, and infrastructure assets could overtake real estate assets around 2025, according to Preqin's forecast. Real estate assets as of June 30 were €101 billion, while infrastructure totaled €77 billion.
The report cited strong performance of private capital assets after the global financial crisis that brought new investors, and new opportunities created by the pandemic when a sharp V-shaped rebound boosted older vintage funds' performance numbers.
Declining interest rates throughout the pandemic pushed equity valuations to historically high levels in Europe, the report said. While venture capital funds continue to see high internal rate of returns since then, private equity fundraising through June 2022 was only €34 billion raised, compared with €136 billion in 2021.
The U.K.'s dominance shifted at the end of 2020, when Western Europe surpassed it in terms of assets under management in all private capital asset classes except private debt and hedge funds, the report said.
The U.K. also lost its dominance in terms of where the funds are based. While in 2010, the U.K. and Luxembourg hosted 41% and 15%, respectively, of Europe-focused funds capital, the proportion is now 16% and 46%, the report said.
