Investment strategists gravitate toward private market options in the year 2025, according to studies.
In a significant shift, European fund selectors are increasingly showing interest in private markets, particularly in private debt and European Long-Term Investment Funds (ELTIFs). This trend, driven by the growth of private debt and the adoption of ELTIFs, is reshaping the investment landscape across the continent.
Private debt is expected to become the fastest-growing strategy in European alternative investments over the next 12-18 months, indicating strong investor confidence in this segment of private markets. Meanwhile, ELTIFs, designed to channel investments into long-term projects and assets, are gaining popularity in Europe, with increasing interest extending to Asia, Latin America, and the Middle East.
The adoption of ELTIFs is seen as part of a broader effort to democratize private market access, moving private markets beyond the exclusive domain of large institutions and ultra-high-net-worth individuals. However, operational challenges remain a significant barrier in private markets, including fragmented workflows, manual data processes, and inconsistent reporting.
Political uncertainty and tariff concerns are identified as key risks for private markets, affecting investor sentiment despite the overall optimistic allocation plans. regional differences also emerge, with Europe leading the way in ELTIFs, while the U.S. focuses on other evergreen alternatives.
Despite these challenges, European fund selectors continue to show a strong intent to increase or maintain private market allocations, motivated by higher return potential. The study shows that private markets are now mainstream and have become an indispensable tool for fund selectors seeking to meet their investment objectives.
Private equity remains the most favored asset class in private markets, with Spain and France having higher adoption of private debt within portfolios (67% and 65% respectively). Italy leads in ELtif familiarity, with 85% of fund selectors familiar and 24% likely to recommend them to clients. Over 37% of selectors surveyed either already allocate or plan to allocate to ELtifs over the next twelve months.
The Nordics, Germany, and Switzerland have the highest average allocations to private market assets (9.4%, 9%, and 8.2% respectively). Portfolio diversification and high return potential are the most commonly cited benefits of private market exposure. The UK has a lower average allocation to private market assets compared to other regions (4.4%).
José Cosio, head of intermediary - global ex US at Neuberger Berman, comments on the resilience and diversification provided by private markets in a volatile macroeconomic environment. Neuberger Berman has launched the NB Private Markets Academy, an on-demand platform providing education and insights to help advisers and investors better understand private markets.
The European fund selector study conducted by Research in Finance and Neuberger Berman shows an increase in appetite for private market assets since 2024. Interest in private debt has seen a significant year-on-year increase, with 47% of selectors planning to raise allocations. Approximately 70% of Pan-European selectors now report familiarity with ELtifs, up from around 50% in 2024.
Fund selectors express that they "can't afford to ignore" active ETFs, indicating a growing interest in these investment products. As the private markets sector continues to evolve, it is expected that fund selectors will continue to seek out opportunities to increase their allocations, driven by the potential for higher returns and the growing popularity of products like ELTIFs and private debt.
- Investment fund managers are increasingly exploring alternatives in finance, such as private markets, particularly private debt and European Long-Term Investment Funds (ELTIFs), as a result of growing confidence in these segments.
- Policymakers are aiming to democratize private market access, moving it beyond the realm of large institutions and ultra-high-net-worth individuals, by promoting the adoption of ELTIFs, a strategy that is gaining popularity not only in Europe but also in Asia, Latin America, and the Middle East.
- Despite operational challenges and political uncertainties in private markets, many fund selectors are showing a strong intent to increase or maintain their private market allocations, driven by the potential for higher returns and the growing popularity of products like ELTIFs and private debt.
