The European Fund and Asset Management Association (Efama) published a series on 8 December 2023, which focuses on the alternative investment funds (AIF) market in Europe.
Net assets of AIFs reached €7.26trn at the end of the first half of 2023, with total AIF asset growth since the end of 2015 amounting to 41%. Net assets of AIFs stood at €5.14trn in 2015.
“The solid growth of AIF assets under management since 2015 suggests that, overall, the AIFMD [Alternative Investment Fund Managers Directive] is functioning well. AIFs clearly have a place, next to Ucits, in delivering returns to investors and providing financing to the economy,” said Thomas Tilley, senior economist at Efama.
Compared to Ucits (undertakings for collective investment in transferable securities, or retail-friendly funds ), the net asset growth and net sales of AIFs fluctuate less, said Efama in its press release. This is thanks to the closed-ended structure of many AIFs and the fact that AIFs invest less of their assets in listed stocks than Ucits. “AIF investors, mainly insurers and pension funds, also tend to hold their investments for the long term, resulting in fewer significant redemptions during periods of market stress,” added the association.
Luxembourg the third-largest domicile in Europe
At the end of the H1 2023, the five largest domiciles in the European AIF market were Germany (29%, €2.106trn of AIF assets), France (18.4%, €1.333trn), Luxembourg (13.3%, €966bn), Ireland (11.6%, €843bn) and the Netherlands (10%, €728bn). The remaining 17.7% (€1,289bn) of AIF assets were domiciled elsewhere in Europe.
The AIF market has become more “concentrated” in the past few years, noted Efama. The market share of the top five domiciles has shifted from less than 80% in 2015 to more than 82.3% at the end of H1 2023.
Luxembourg domestic market: 81% Ucits, 19% AIFs
Looking again at the top markets, Efama’s report shows that even though Luxembourg and Ireland the two main cross-border fund hubs in Europe, AIFs only account for 19% and 22% of their net fund assets, respectively. AIFs in other countries--like Germany, France or the Netherlands--take up a larger domestic marketshare.
Share of equity AIFs drops due to stock market downturn
From 2020 to 2023, the share of equity AIFs dropped from 13.9% to 10.5%, mostly due to the the stock market downturn in 2022, said Efama. Interest rate increases had a negative impact on bond prices, leading to the share of bond AIFs also declining.
The share of multi-asset funds stayed roughly stable, noted the association, while real estate funds and other funds saw their market share increase. These recorded net inflows, said Efama in its communiqué--the assets these funds mainly invest in (real estate and alternative and often less liquid assets) were less affected by the 2022 decline in capital markets.
Find Efama’s full market insights report .