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Alternative Market Briefing

Esma puts EU alternative fund industry at $6.5tn

Tuesday, January 14, 2020

Laxman Pai, Opalesque Asia:

Europe's financial watchdog European Securities and Markets Authority (Esma) said that the European alternative investment funds (AIFs) saw their value increase by 11% to €5.8 trillion ($6.5tn).

Nearly 40% of assets under management in the EU funds industry is made up of alternative AIFs, latest figures show. The report was based on data gathered from 30,357 AIFs, representing almost 100% of the market.

Funds of Funds accounted for 14% of the industry, followed by Real Estate Funds (12%), Hedge Funds (6%) and Private Equity Funds (6%).

The Hedge Funds sector amounted to €333bn in NAV of all AIFs. However, when looking at gross exposure they total 67% of all AIFs due to their increasing reliance on the use of derivatives. These funds are exposed to financing risk, as one-third of their financing is overnight. However, the fact that they maintain large cash buffers offers some security.

The remaining category of Other AIFs accounts for close to two-thirds of the industry (61%), covering a range of strategies with fixed income and equity accounting for 67%.

Most AIFs are sold to professional investors (84%) but retail participation is significant at 16%, with the highest share in the Funds of Funds and Real Estate categories.

Liquidity risk an issue in Real Estate and Funds of Funds sectors

The two sectors with the largest percentage of retail investors, Funds of Funds (FoF) with 31% and Real Estate with 21%, a......................

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