New analysis by PwC forecasts that assets under management in private markets in Ireland is expected to grow 14.2% (CAGR) on average per annum for the next 5 years, reaching approximately EUR 50bn in 2025, up from EUR 25bn in 2020. This compares to global expected growth of up to 8% (CAGR) on average per annum reaching US$15tn in 2025, up from US$9.5tn in 2020.
These growth projections for Ireland’s Private Markets funds industry were revealed at a recent webcast hosted by the PwC, focusing on opportunities for the Alternative Investment Funds industry. A Poll carried out at the webcast, amongst nearly 100 senior global asset managers, revealed the key drivers for using Ireland as a location to invest in Alternative funds were the ease of doing business (38%) and the range of products suited for investor needs (35%).
These growth projections once again confirm the success of the Irish funds industry and its potential, particularly for funds in the private markets. We have recently seen non-bank lending exceed bank lending in advanced economies. The webcast heard that returns are harder to find and investors are increasingly looking to the private markets, which will play a key role in providing the capital to get economies back to growth. Private equity investment could help turn around businesses in sectors hardest hit by COVID-19, such as hospitality, travel and leisure.
Andrea Kelly, PwC Ireland Leader for Private Markets and Alternative Investment Funds, said: “Ireland’s key success factors as an international centre for funds management and alternative investment, include our 30 year proven track record with over 40% of global alternative investment fund assets currently serviced in Ireland, product range, highly talented flexible people, a sustainable business proposition as well as continued access to the EU. In particular, US investors have a deep affinity for Ireland, including using Ireland as a gateway to Europe. However, there may be some more work to do to promote the benefits of our regulatory and tax regimes to international asset managers.”
The need for further jurisdictional consolidation and even greater product development internationally, involving greater discussion with regulators, was highlighted. Investors would like to see even leaner investment structures with more tailored and flexible investment portfolios. With the recent passing of the Investment Limited Partnership (ILP) Act, Ireland now has access to an improved product suite. This was confirmed by the Poll carried out at the webcast revealing that 74% of attending senior global asset managers stating that they would consider an Irish ILP for their next investment structure.
The enormous opportunity for private equity managers and investors as a force for good was noted. Private markets will play a central role in getting economies back on their feet and laying a foundation for growth while boosting risk-adjusted financial returns to investors. Environmental, social and governance (ESG) priorities are expected to be at the forefront of investor concerns with a particular focus on Net Zero. The webcast highlighted there simply will be no trade-off between ESG and returns - both are a clear ‘must have’ and need to be delivered. But this will take resources, skills and experience. Any asset manager not doing a robust assessment of ESG will struggle. Value will no longer be achieved or measured in the same traditional way.
Andrea Kelly concluded: “There are clear opportunities ahead for Ireland’s Alternative Investment Funds and Private Markets industry, but work needs to be done to realise the potential. There is no doubt that the new fit for purpose Investment Limited Partnership regime in Ireland completes Ireland’s product offering. This is an important final piece in the jigsaw to capitalise on Ireland’s broadening appeal as the domicile of choice for alternative assets. The industry must now put all efforts into maximising returns through digital investment and seizing the opportunity from ESG.”
The webcast was hosted by PwC Ireland in mid February 2021 to explore Alternative Investment Funds and was attended by almost 100 senior global asset manage.
Explanation of ‘Alternatives’: Alternative assets typically refer to investments that fall outside of the traditional asset classes commonly accessed by most investors, such as stocks, bonds or cash investments. Due to their alternative nature, these investments may be less liquid than their traditional counterparts and may require a longer investment period before any material value is realised. They typically include private equity, venture capital, hedge funds, private credit, infrastructure and real estate.
Explanation of ‘Private Markets’ :Private markets consist of 4 asset classes - private equity (including venture capital), infrastructure, real estate and private credit. These are primarily illiquid classes with a long term investment horizon.
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