Real assets ‘winning bet’ for post-Covid era: Preqin
Investment into alternatives is running at record levels with assets under management (AUM) in Europe hitting a new high of €2.06 trillion as of December 2020, up 13.6% from €1.81 trillion a year earlier according to the 2021 Alternative Assets in Europe Report produced by research firm Preqin and asset manager Amundi.
The report reveals that private capital activity started 2021 positively with deals in the first half worth €236 billion, the equivalent of 83% of the whole of 2020’s €284 billion total.
Although the number of real estate deals and their total value declined in 2020, the report suggests that post-pandemic changes in ways of working could mean investment into office refurbishment projects outweighs that into new developments. And it says retail and hotel assets could be back on the radar through 2021 and into 2022.
Dominique Carrel-Billiard, global head of real assets at Amundi, commented: “Real assets will be the winning bet for a post-COVID world. Most notably, a new post-COVID cycle could see a resurgence of inflation and continue to drive capital towards these asset classes which offer protection against inflation and the prospect of higher returns. Real assets can help to meet the economic challenges posed by the COVID recovery and fulfil investor expectations on both performance and impact, notably by helping allocate capital towards the energy transition. As such it is crucial to make real assets accessible to a wider range of savers.”
Infrastructure already one of 2021 highlights
Meanwhile, infrastructure has been a bright spot, with H1 2021 deal value of €87 billion, which was also close to the figure for the whole of 2020. Renewable energy strategies dominate the pipeline in terms of numbers but telecoms has increased its share of deal values in recent years.
European fund managers are global leaders in the adoption of ESG, with 80% of private capital AUM under ESG commitments, compared to just 47% in North America and 24% in Asia, according to another Preqin report, The Rise of ESG in Alternative Assets.
Further investment opportunities are expected to arise owing to the EU’s accelerated decarbonisation agenda. In infrastructure, the number of renewable energy deals in 2021 is on track to top 600 for the sixth year in a row.
Preqin founder and CEO Mark O’Hare said: “We are ready to see Europe’s economies reach new records in 2021, optimistic that they are on the road to recovery following the pain of the pandemic. Our discussions with Europe-focussed investors confirm that they are ‘sticking with the program’ as regards their allocations to alternative assets: faced with uncertainty and diminished returns across all asset classes, the attractions of alternative assets—including innovative green investment opportunities—remain compelling.”
