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As inflation increases, European fund managers resort to private markets.

According to a recent report by CoreData Research, over three out of ten European financial institutions are using private marketplaces.

According to 27% of 130 European fund pickers, their company is switching its investing strategy from public to private markets because it thinks the latter have better return possibilities.

Half said that investors are looking for profits in private debt markets due to low bond rates and increasing inflation. Moreover, approximately one in three respondents predict private markets will reliably outperform public markets over the near future.

According to the study, fund selectors are turning to private markets in order to develop sustainable strategies. In fact, 38% of respondents think that private market investing will be crucial to achieving net-zero carbon emissions, and more than half say they anticipate increasing investment in renewable energy infrastructure over the next few years.

On the back of the energy transformation, more than half see potential inside real assets.

However, other investors are put off by worries that the asset class can become overhyped and subject to stricter regulation.

A more crowded market, in the opinion of 44% of respondents, is making it harder to distribute investments within the sector. In addition, one in three people believe that private markets will face stricter regulation, which will reduce their appeal.

The findings, according to CoreData's founder and principal Andrew Inwood, demonstrate how "private markets are fast becoming central to investment strategies."

He added, "While private markets offer the prospect of superior, uncorrelated returns, they also present a broader opportunity set by tapping into structural trends at the forefront of economic and sustainable change."

79% of fund pickers feel internal competence and sufficient resources are essential when choosing an asset manager.

Additionally, there is a propensity for fund selectors to favor large asset managers, with 40% of survey participants doing so against 17% who do not.


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