North American fund managers look to Europe to broaden investor base

• But Ocorian study shows market entry costs and recruiting people to lead the move are potential roadblocks
• Renewable energy and real estate funds most likely to see the biggest increase in European fundraising over the next 12 months

North American fund managers are increasingly looking to raise funds in Europe as they seek to broaden their investor base, new research* from Ocorian, a global leader in fund administration, capital markets, corporate, private client and regulatory services shows.

Ocorian’s study with private equity, private debt, real estate, venture capital and infrastructure fund management executives in the US and Canada responsible for $1.591 trillion assets under management found 83% already raise capital in Europe. More than a third (35%) who do not currently raise capital in Europe plan to start doing so within 12 to 24 months.

Around 61% say the growing recognition among North American fund managers of the benefits of broadening their investor base is among the top three reasons for increased capital raising in Europe over the next two years, while more than half (53%) say the high level of investment opportunities in North America are attracting European investors.

Around half questioned (48%) say there is a preference for US managed products compared with European, while 43% say the growing levels of dry powder at European institutional investors is among the top three reasons likely to boost capital raising in Europe.

Ocorian’s research questioned fund managers on what would prevent increased capital raising in Europe and found 62% saying the cost of entry against market upside is one of the top three reasons that could hit capital raising, while 49% said problems recruiting people to lead capital raising in Europe is among their top three reasons. 

Other issues identified include the attractiveness of their strategy to European investors cited by 46% with 42% pointing to difficulties distributing cross-border and 40% challenges with choosing the right jurisdiction.

Ocorian’s study found one in five (19%) fund managers questioned have been raising capital in Europe for five years or more while 31% have started doing so within the last two to three years. 

Currently 65% of investors say up to 25% of their capital raising is from Europe and around a quarter (26%) say 25% or more of their capital raising is from European investors. In two years' time 63% estimate around up to 25% of their capital raising will be from Europe and a third (33%) say 25% or more of their capital raising will be from European investors.

Fund managers questioned, picked renewable energy and real estate the most among the top five asset classes they expect to see the biggest increase in European fundraising over the next 12 months.

Paul Spendiff, Head of Business Development – Fund Services, at Ocorian, said: “Many alternative fund managers from North America have been active in Europe for some time but the research shows that now they are increasingly looking to expand their capital raising and broaden their investor base in the region.

“There is also a strong belief amongst managers based there that European investors are looking to North America for more attractive investment opportunities than are available domestically and that they have substantial levels of dry powder to invest.

"There are, however, stumbling blocks for North American fund managers raising capital in Europe with concerns about the cost of entry and putting boots on the ground. Fund managers clearly need the right support from local strategic partners before raising money in Europe to ensure they meet local regulatory requirements and investor needs.”

About Ocorian Fund Services

Ocorian’s fund services team delivers operational excellence across fund administration, AIFM, depositary and accounting services to the world’s largest financial institutions along with dynamic start-up fund managers and boutique houses. It’s team of over 300 funds specialists work across all major asset classes of alternative investment funds such as private equity, real estate, infrastructure, debt and venture capital, whilst its specialist Islamic Finance team is a leading provider of Sharia-compliant investment structures.

*Ocorian commissioned independent research company PureProfile to conduct research with 100 senior executives at alternative fund managers focusing on private equity, private debt, real estate, venture capital and infrastructure in the US and Canada collectively responsible for $1.591 trillion assets under management during April 2024