Revenue from private markets strategies will outpace that of traditional investments by 2027 for European asset managers, Morningstar predicts.
The firm’s latest "European Asset Manager Pulse," which looks at shifts in asset management, estimated that private markets revenue will account for 55% of total European asset manager revenue by 2027, despite projected assets under management of 23% of the total. Alternatives strategies comprised 40% of total revenue in 2015, accounting for 14% of total AUM.
Within private market strategies, private equity now accounts for 39% of a total estimated $15.79 trillion in assets under management, according to Pitchbook figures provided by a Morningstar spokesperson. Venture capital came in next, accounting for 24%, followed by private credit (11%), real assets (9%), real estate (8%) and funds of funds at 6%. Secondaries strategies accounted for the remaining 3%.
Among the trends affecting European money managers is consolidation, with Morningstar highlighting high-profile deals including that of BNP Paribas buying AXA Investment Managers. Mergers are “paving the way for scale advantages amid growing competition,” the report said. “Our analysis shows that mergers done only for scale often fail to deliver the promised synergies,” it added.
“The dynamics within Europe’s asset management industry are undergoing a profound shift,” said Johann Scholtz, senior equity analyst at Morningstar, in a news release accompanying the report. “An increasing focus on private markets, coupled with the rising dominance of megafunds and the urgency to address pension shortfalls, creates opportunities for firms to strengthen their competitive positioning."
