While strong sustainability credentials are a key driver of growth in alternative asset classes, sustainability also preseneds a set of independent challenges for investment managers, with 77 per cent of all managers surveyed specifically identifying ESG regulation as a 'deterrent' to participating in European markets.
John Donohoe, chief executive at Carne Group, said: “Amid increasing demand from wealth managers and DC pension schemes to drive greater, more sustainable returns for their clients, the democratisation of private markets is a rapidly growing and attractive opportunity for asset managers globally.
“While the flow of retail and pension capital into previously inaccessible markets must of course be accompanied by appropriate safeguards to protect investors and their assets, our research underlines that the current regulatory environment in Europe is proving difficult for many asset managers to navigate and may in fact become a barrier to these products entering the market.
Managing liquidity, ensuring appropriate pricing, ESG scrutiny and novel fund structures present challenges for all investment managers looking to scale private market propositions in Europe, the study found.
Outsourcing
Turning to solutions for addressing these challenges, the investment managers surveyed expressed a strong inclination towards external support when it came to launching and raising funds in European markets.
The majority (87 per cent) expect their use of outsourcing to increase over the next five years, with 48 per cent of UK managers and 24 per cent of US managers citing reducing regulatory risk as a motivation for doing so.
Des Fullam, chief regulatory and solutions officer at Carne Group, added: “As the market for illiquids grows and matures, we also expect outsourcing to play a critical role in facilitating effective distribution and speed to market, so that investment managers can capitalise on the significant private market opportunity presented across the continent.
“The fragmented nature of the European market can present challenges to internal sales teams as they look to scale, market and distribute funds. Increasingly, internal sales teams are turning to the support of third-party specialists to help them launch across their European networks efficiently and effectively.
"Pre-marketing, domiciling and distribution network support are just some of the services third-party management companies can offer in enabling investment managers to launch and scale their funds in Europe with greater speed and confidence.”
