December 12, 2023 | Stamford, CT — Rising interest rates and economic uncertainty have not curbed Continental European institutional investors’ growing appetite for private assets. 

Approximately 30% of the institutions participating in a new study from Coalition Greenwich plan to increase their allocations to private debt, private equity and/or infrastructure debt and equity in the next three years. More than 40% of Continental European institutions expanded allocations to private debt over the past three years, with more than 50% boosting allocations to private equity. Continental Europe’s largest institutions are most likely to shift assets into these asset classes. 

“In Continental Europe, target allocations have increased significantly across multiple private markets asset classes,” says Mark Buckley, Head of Investment Management at Coalition Greenwich. “In contrast, the picture in the U.K. is much more mixed, with for example, 40% of investors increasing allocations to private debt, while another 40% are decreasing allocations to private debt.” 

Increased Demand for Managers in Private Assets
Continental European investors increasing allocations to private assets are creating demand for asset managers in these asset classes. Over 30% of Continental European institutions expect to hire a new manager in private equity, private debt and private infrastructure equity in the next three years. 

“We expect manager hiring to remain strong across a broad range of private asset classes,” says Mark Buckley. Preference for specialist firms ranges from 22% for private debt to 39% for private equity and is typically higher on the Continent. Almost 75% of asset owners in Europe prefer fund duration of 6-10 years when making private market investments.

European institutions see an opportunity to take advantage of the growing role of private lenders, who are stepping in to fill a void left by the pullback of many European and global banks from lending. Approximately 60% of institutions participating in the study cite direct lending to corporates as the most attractive opportunity in private debt. Institutions, especially those in the U.K., also believe the sudden shift in the rate environment will create attractive opportunities for investors in distressed debt.

“The strong demand we are seeing for private infrastructure is being driven in part by sustainability,” says Mark Buckley. “More than 80% of institutions in Continental Europe and the U.K. cite alternative energy including clean technology, geothermal, solar, hydro, and wind power as the most attractive opportunity within the asset class.”