Private markets have unique capital deployment opportunities, says Ocorian
20 December 2022 UK
Image: wichayada
Private markets have a “unique opportunity” to accelerate capital deployment from traditional markets to alternative assets, says an Ocorian report.
As global economic conditions worsen, the global financial services group predicts that growth in the year ahead will focus on pure private market investments and a shift towards multi-alternative asset strategies.
Ocorian also forecasts an increased focus on distressed asset funds which will be longer term and closed ended.
Alternative assets are growing in popularity, the firm adds, as they offer the potential for attractive yields and low correlation to economic conditions, such as interest rates and inflation, unlike bonds and equities.
However, the sector needs to speed up on standardisation and tokenisation to match traditional markets, Ocorian affirms.
Ocorian estimates the sector has up to 18 months to achieve what traditional markets have done in 12 years in this area and is seeing growth in private markets reflected in planned fund launches.
Its analysis shows more than 1170 private funds are raising capital across the major jurisdictions. Around 600 are based in Luxembourg compared with 226 in Ireland, 193 in the UK, 83 in Guernsey and 71 in Jersey.
Richard Hansford, head of business development for the UK at Ocorian, says: “The whole investment thesis and the investment life cycle is changing. Investors are willing to commit capital for longer and see greater value in private assets, which is driving growth. Investors increasingly believe it will be some time before we see growth in traditional markets.
“Luxembourg is clearly the biggest in terms of private asset market activity, and that trend will continue, demonstrating the preference for managers to have onshore EU structures in the private market space, which applies very much to US managers wanting to expand in the European Union.”
He adds: “Our industry does have to catch up. The private market space and the alternative space is definitely deficient in standardisation. Tokenisation of private markets will enable participants to address growing demand from institutional investors while standardisation of data will help drive expansion by enabling private markets to match traditional markets on transparency.”
As global economic conditions worsen, the global financial services group predicts that growth in the year ahead will focus on pure private market investments and a shift towards multi-alternative asset strategies.
Ocorian also forecasts an increased focus on distressed asset funds which will be longer term and closed ended.
Alternative assets are growing in popularity, the firm adds, as they offer the potential for attractive yields and low correlation to economic conditions, such as interest rates and inflation, unlike bonds and equities.
However, the sector needs to speed up on standardisation and tokenisation to match traditional markets, Ocorian affirms.
Ocorian estimates the sector has up to 18 months to achieve what traditional markets have done in 12 years in this area and is seeing growth in private markets reflected in planned fund launches.
Its analysis shows more than 1170 private funds are raising capital across the major jurisdictions. Around 600 are based in Luxembourg compared with 226 in Ireland, 193 in the UK, 83 in Guernsey and 71 in Jersey.
Richard Hansford, head of business development for the UK at Ocorian, says: “The whole investment thesis and the investment life cycle is changing. Investors are willing to commit capital for longer and see greater value in private assets, which is driving growth. Investors increasingly believe it will be some time before we see growth in traditional markets.
“Luxembourg is clearly the biggest in terms of private asset market activity, and that trend will continue, demonstrating the preference for managers to have onshore EU structures in the private market space, which applies very much to US managers wanting to expand in the European Union.”
He adds: “Our industry does have to catch up. The private market space and the alternative space is definitely deficient in standardisation. Tokenisation of private markets will enable participants to address growing demand from institutional investors while standardisation of data will help drive expansion by enabling private markets to match traditional markets on transparency.”
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