European investors ramp up private equity allocations

Office Meeting WideRetail investors in Europe are increasingly turning to private equity, according to research commissioned by fund manager Neuberger Berman.

In a study conducted by Research in Finance, it was revealed the average proportion of retail client assets invested in private markets now stands at 7.7%, slightly below the institutional client premium of 9.2%. 

However, 22% of European retail clients have yet to explore private assets.

The UK falls behind its regional counterparts, with just 4% of client assets allocated to private equity. 

German investors boast the highest proportion, averaging 12%, closely followed by Benelux at 11%, with France and Switzerland sitting at 9%. 

Private equity remains a compelling choice within the private markets space. Among European investors already involved in private equity, a net 11% of retail allocators and a net 7% of institutional allocators have increased their exposure to the asset class over the past year. 

Retail demand for private equity is expected to remain robust, with a net 12% of European retail allocators poised to further increase client exposure. This figure surpasses the net 4% increase expected within the institutional segment. 

José Cosio, managing director at Neuberger Berman, has attributed this pickup in demand to the “democratisation” of private equity.

“Private market strategies have long been used by institutional investors to help reduce volatility and deliver consistent, long-term performance,” he said. “However, for decades, individual investors have had limited access to similar private market opportunities. Fortunately, the democratisation of the asset class continues to accelerate, with retail investors increasingly able to access private strategies.”

A driver in this democratisation has been the European Long-Term Investment Fund (Eltif), a relatively new vehicle. In April, BlackRock executive West Lockhart told Funds Europe he expects the Eltifs to “triple” in the next few years.

In March, the EU confirmed the Eltif 2.0 regulation was proceeding and would apply from January 2024.

© 2023 funds europe

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