European fund selectors are continuing to accelerate private equity allocations, with retail investors particularly optimistic on the thriving asset class amid the ongoing economic uncertainty.
In the recent 2024 edition of the European Fund Selector Study (EuroFSS), in conjunction with Neuberger Berman and conducted by Research in Finance, which canvassed the views of 886 European (including UK) fund selectors working within both the retail and institutional channels – highlighted the ongoing democratisation of private markets, with a net 29% of retail allocators who allocate to or recommend private equity increasing private equity weightings relative to a year ago, versus a net 9% rise at the institutional level.
However, there were significant differences between countries, with Spanish selectors especially enthusiastic about private equity over the past year – with a net 41% of allocators elevating private equity positions. A net 32% of Swiss selectors also heightened allocations, followed by Italy at 23%. In contrast, more British selectors indicated a decreased than increase in allocations over the past year.
Future private equity prospects also look bright, particularly in the eyes of retail selectors, with a net 26% likely to increase positions over the coming year – compared to a net 4% within institutional.
In addition to leading the way over the previous year, Swiss and Spanish selectors are again regional frontrunners in planned private equity holding increases over the year ahead, at a net 30% and 28% of allocators, respectively. It is not all doom and gloom for UK selectors, with a net 22% planning to boost private equity positions.
While growth equity was tipped as the leading light in terms of private equity sectors last year, both retail and institutional selectors singled out small/mid-cap buyout as the most attractive area in today’s market environment – followed by growth equity and venture capital.
The rise of the European Long-Term Investment Fund, or ELTIF, structure is also accelerating – with more than half of pan-European investors familiar with vehicle. About two-thirds of Benelux and Italian selectors have total familiarity with the structure, with 15% of Italian respondents already recommending the strategies.
José Cosio, Head of Intermediary EMEA & LatAm at Neuberger Berman, comments: “It is evident the ELTIF structure, of which Neuberger Berman was an early adopter, is gaining momentum across pan-European investors. This is driven by the need for investors to seek portfolio diversification and sources of long-term robust returns.
Despite public market volatility, we continue to see significant deal flow across Neuberger Berman’s $115bn private markets platform with on average 11 deals per week across co-investments in 2023. This volume continues to enable the team to take a highly selective approach to building a diversified portfolio of direct private equity investments alongside leading private equity managers.
“With a healthy pipeline of new investment opportunities supported by growing allocation to ELTIF private market strategies, we believe this structure will become the gold standard of investor access in years to come.”
