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Retail investors seeking opportunities in European private asset space

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Cerulli Associates’ latest report, European Alternative Investments 2021: Cause for Both Celebration and Caution, shows that the democratisation of private assets is a key theme in the European asset management industry today, with retail investors being given access to investments previously reserved for institutions.

Private assets—traditionally available only to large and sophisticated institutional investors—are becoming increasingly attractive to retail investors. Cerulli expects individual investors to represent a higher proportion of fundraising for private markets over the next 12 to 24 months. Although institutional investors such as corporate and public pension schemes remain key targets for many fund managers with private market expertise, such managers are increasing their focus on capturing new growth opportunities in wholesale channels.

“The European retail market is heterogenous in terms of knowledge of and access to private investment,” says Justina Deveikyte, director in Cerulli’s European institutional research team and lead author of the report. “Asset managers will find most opportunities in European markets where retail clients have less exposure to private investment capabilities. Given the variety of vehicles used to deliver private investments and the complex nature of the underlying strategies, education will be crucial, with asset managers passing information to intermediaries and intermediaries passing information to their clients.”

Although the opportunity set in the retail sector is growing, Cerulli’s data shows that not all markets offer equal opportunities for private banks and fund managers. Around 67 per cent of the fund managers we surveyed expect private banks in Italy to represent the best opportunities to gather assets for private market products over the next 24 months, whereas only 40 per cent said that private banks in the UK will offer the most opportunities to raise money.

In the short term, more private investment opportunities are likely to come from ultra-high-net-worth individuals than from high-net-worth individuals, given the regulatory challenges, significant minimum capital commitments, and long lock-up periods. The typically high minimum capital commitments and lack of liquidity may deter higher allocations to private equity, but managers have launched several products targeting investors with lower investment requirements and higher liquidity.

As is the case throughout the asset management industry, environmental, social, and governance factors and sustainability are playing a prominent role in private assets. 

“One-third of the large private banks Cerulli surveyed said that their clients show significant demand for private equity funds that target low-carbon or climate-resilient investments,” says Andrius Dovydavicius, a senior analyst in the European institutional research team and co-author of the report. “However, only 19 per cent of small private bank respondents said that they see significant demand for private equity funds that focus on climate change. Smaller private banks are more likely to favour thematic funds over climate-focused private equity funds.”

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