As the alternative assets industry continues to grow, Preqin is launching an initiative examining the Future of Alternatives. In conjunction with key industry participants, we take a five-year look into the future to see where the market will be, what changes fund managers are planning for and how investors plan to invest in 2023.
This contribution is provided by Gianluca D’Angelo, Head of EMEA at Eaton Partners.
With consultants becoming increasingly global in their footprint and expanding their discretionary relationships with sources of local capital, managers are now able to diversify their investor base geographically and by type in an efficient manner through a relatively concentrated number of interactions with consultants rather than having to always build fresh relationships with client-end capital in new regions. While not to under-empathize making pre-marketing trips to new regions, accessing local capital through global consultants in an efficient manner makes the benefits of geographic diversification increasingly attractive.
In terms of investor types, we have seen a reduction over the last 10 years in the source of capital from funds of funds as the industry has continued to mature. Increasingly, as LPs have become more sophisticated, they have looked to make more direct fund commitments in order to try and reduce their cost base and manage their own portfolios. Of course, notable fund of funds managers are still prevalent, their key value-add being their ability to gain exposure to higher-quality GPs than the end investor would otherwise be able to.
We expect to see pension funds, sovereign wealth funds, endowment plans and family offices continue to increase their allocations to private markets and maintain their positions as the leading sources of capital. As LPs make increasingly sophisticated investment decisions and look to further reduce their fee base, we expect further increases in co-investments and direct deals. And as the industry further matures, we expect to see a larger proportion of LPs investing in long-term/open-ended private equity structures.
Download your copy of the Preqin: The Future of Alternatives here.