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EU alternatives took larger market share

While its one-year delay may limit the surprise factor, ESMA’s annual statistical report still sheds interesting light on how EU Alternative Investment Funds, collectively worth around €6 billion, keep capturing territory.

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With an 11 percent increase in their net asset value, the European Union’s total of Alternative Investment Funds (AIF) increased their share of the European fund industry from a third to 40 percent during 2018. This is to read in the EU Alternative Investment Funds 2020 report from the European Securities and Markets Authority (ESMA).

Most of the growth came from launches of new AIFs, rather than valuation effects, according to the report.

The number of AIFs increased by 15 percent in the year, to 30,400. Average fund size stayed flat at 190 million euros per fund.

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Hedge funds up for hits

The diversity of strategies among AIF makes it hard to sum up trends. The largest subcategory is funds of funds (FoF), holding 14 percent of the AIF net assets. Second is real estate funds with 12 percent, followed by hedge funds and private equity funds each with 6 percent. Thus “Other AIFs” make up a full 61 percent of AIF net assets, and are given deeper analysis in the ESMA report. As for the hedge funds, they account for two thirds of all gross exposure, however, due to their heavy use of derivatives.

Two sources, two pictures

The total net asset value (NAV) of EU AIFs was 5,800 billion euros at the end of 2018. This number corresponds closely with a figure published many months earlier by the European Fund and Asset Management Association (EFAMA), which estimated AIF net assets at 5,900 billion euros for end-2018. However, the two sources differ remarkably in their description of growth, due to different values for end-2017: EFAMAs figures showed no AIF growth in net assets during 2018.

EFAMAs latest fact sheet, which covers October 2019 data, puts the EU’s AIF net assets at 6,600 billion euros, to compare with the total net assets of UCITS funds which were 10,700 billion euros.

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