Launching Alternative Funds in Europe: Easier Than You Think
The European Opportunity
Europe continues to offer alternative investment managers attractive fundraising opportunities. With the right partners, setting up and managing a European vehicle is more straightforward than it has been for many years. While asset managers today are launching alternative investment funds in the U.S. to take advantage of an investor community seeking greater diversification and higher returns, the alternative investment marketplace has become crowded and highly competitive. At the same time, investors have become more sophisticated, are demanding more of managers in terms of transparency and reporting, are being more selective in their fund choices and allocations, and are placing continued downward pressure on fund manager fees.
With business growing and allocations to alternatives increasing, U.S. managers may want to consider expanding their portfolios in Europe and diversifying their client bases. According to a report from Preqin,(1) there are more than 2,800 active institutional investors in Europe across the various private equity and hedge fund asset classes. The same report also cited that Europe-focused alternative investment fundraising surpassed the pre-global financial crisis high point of €132 billion in both 2016 and 2017. A new high mark was set in 2017 when 363 alternative funds closed, securing an aggregate of €184 billion in capital commitments.
To be successful with a European launch, managers need to familiarize themselves with European legal structures and operational differences as well as an array of regulatory requirements. As a result, many U.S. managers believe that launching in Europe is complicated and difficult to pursue.
The reality, however, is that the European alternatives market is simpler, faster and easier to enter than many U.S. managers may think. By making the right choices and aligning with the right partners, even managers with little to no experience in Europe can launch and manage funds there with relative ease.
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