Laurent Durdilly, Group Head of Private Equity, Real Estate and Securitisation (PERES) at CACEIS, gives his views on PERES market trends and explains how CACEIS responds to the specific needs of asset managers.
As a major player in asset servicing for real estate and private equity fund managers and their institutional investors clients, can you throw light on the reasons for the growth in the unlisted asset classes?
The current growth in unlisted assets (real estate, private equity, infrastructure projects, loans) - the fastest growing asset management sector - is due to a number of factors: the majority of inflows come from institutional investors (insurance companies, pension funds, sovereign funds), which are operating in a context of low interest rates and looking for strongperforming assets in order to get better returns than those they can hope to achieve with traditional bond investments.
Additionally, unlisted assets allow investors to diversify their portfolios and to generate predictable incomes. Institutional investors receive an attractive illiquidity premium to make up for the fact that they are required to hold the assets for a long-term period. They are even more eager to benefit from this given their long investment horizon. We can also see that the short-term volatility of unlisted assets is more reduced than for listed assets and is not affected by the current turmoil on the equity markets.
Another reason for the growth in securitisation, infrastructure and debt funds is the Basel III capital requirements. European banks are moving from an “originate to hold” practice (generating loans that are kept on the balance sheet until maturity) to an “originate to distribute” strategy (loans are now a source of immediate liquidity for the originator).
Lastly, the European authorities (the European Commission, EU Council and the ECB) identify Private Equity as... (Read more)