In a new study conducted by Research in Finance canvassing the views of 892 European fund selectors working within both the retail and institutional channels, the proportion of retail client assets currently invested in private markets now stands at 7.7% on average – just below the 9.2% institutional client weighting. However, the study did find 22% of European retail clients still have no exposure to private assets.
There are major differences at country level across the region, with investors in Germany having the highest proportion of client assets invested in private markets, at 12% on average. This is closely followed by Benelux at 11%, with France and Switzerland next at 9%. The UK is the regional outlier, with just 4% of client assets invested in the private arena.
Within private markets, private equity is continuing to appeal to both retail and institutional clients. Of the European investors currently investing in private equity, a net 11% of retail allocators and a net 7% of institutional have increased client exposure over the past year. Investors in Benelux and Italy are leading the charge, at a net private equity increase of 16% and 15%, respectively.
Further, private equity demand in the retail channel is set to remain strong in the period ahead, with a net 12% of European retail allocators poised to continue increasing client exposure. This is higher than the net 4% increase within the institutional segment. In terms of areas of appeal within private assets overall, European allocators identified private equity primaries and private equity co-investments as the most appealing.
“Private market strategies have long been used by institutional investors to help reduce volatility and deliver consistent, long-term performance. However, for decades, individual investors have had limited access to similar private market opportunities,” José Cosio, managing director at Neuberger Berman, says. “Fortunately, the democratisation of the asset class continues to accelerate, with retail investors increasingly able to access private strategies.”
To continue supporting heightened individual investor access into private markets, Neuberger Berman earlier this year unveiled its third private equity-focused European Long-Term Investment Fund, or ELTIF. It carries a minimum investment starting from €25,000 for investors across Europe.
“We believe the ELTIF market, which grew by more than 50% in 2022 year-over-year, could become the standard for providing European individual investors with access to private equity. In the UK, the industry is increasingly embracing the new LTAF structure, which will also help to reduce barriers to entry. As UK private market allocations lag European peers, this is a welcome development,” Cosio adds.
“Private equity has become a significant diversifier for many of our clients, so we are pleased to be able to provide a new generation of savers with access to the differentiated return profile of the asset class in an efficient way.”