European private market managers could attract more private clients by offering more innovative products, according to a report by consultancy Cerulli Associates.
The report – ‘European Alternative Investments 2023: Helping Investors Diversify’ – found private market assets in the region continued to grow in 2022, albeit more slowly than in previous years.
Growing appetite for private assets among investors took total assets under management (AUM) beyond €2.3 trillion by the end of 2022.
Though growth was driven by institutional investors, most private banks and wealth managers expect increased allocations from underexposed high-net-worth and ultra-high-net-worth clients in the coming years.
Justina Deveikyte, director of Cerulli’s European institutional asset management research, said: “Half of the German and around 40% of the Swiss and UK private banks and wealth managers plan to increase their allocations to private equity growth strategies over the next 12 to 24 months.
“They already have significant allocations to private equity strategies, yet private banks and wealth managers generally remain bullish on private equity.”
While appetite for private equity – and infrastructure – remains strong in the coming months, the consultancy says demand for real estate is likely to decrease in the next 12-24 months.
It noted that 20% of the French private banks and wealth managers surveyed by Cerulli plan to reduce their recommended allocations to real estate, while around 13% of UK and Italian respondents anticipate decreasing their recommended allocation to the asset class.
Cerulli noted that new semi-liquid products and technologies could provide diversification benefits and have a strong sustainability focus.
Deveikyte added: “Rapid development of technology, especially the tokenization of assets, will help to speed up the democratisation of private assets.
“Several managers have already tokenised some of their funds, and many more are considering doing so over the next three to five years.”
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