“Alternative investment has been gaining popularity among private banking clients for different reasons.” Among them Eduardo Martín, Product Director of Andbank Spain, highlights, “the search for sources of returns uncorrelated with the listed markets, diversification of their portfolios, access to exclusive and different opportunities that are more understandable and close to the world of the real economy of the company, which is where most of the investors come from.”
The high volatility of the traditional fixed and variable income market has also been responsible for the boost in the private capital market, which ranges from real assets, such as the infrastructure or real estate sector, to others such as private credit or venture capital. Joaquín Casasús, general director of Abante, admits that “the environment of zero or negative interest rates made it easier for private investors to pay attention to alternative products that, until then, due to their lack of liquidity, were concentrated in institutional investors. Although rates have normalized and appetite has slowed somewhat, we believe this slowdown is temporary.”
Thus, investors are betting on greater diversification and the search for profits that are not so exposed to economic cycles, improving profitability at the cost of accepting longer liquidity terms, between 5 and 10 years. Bestinver corroborates that "Alternative investment is a sector that offers attractive profitability potential, always with the condition that the investor maintains a medium and long-term time horizon." A reality that implies for Martín, from Andbank, “that investors fully understand the risks of this type of product and work with trained financial advisors before making investment decisions, especially assessing the risk of illiquidity.” Despite this, the figures speak.
KPMG states that in the last five years the volume managed in private equity and venture capital in Spain has doubled. In 2022 the figures were 9,000 million euros, more than double that of ten years before, according to the CNMV. It is expected that in 2025 the projection of euros invested in private market funds will increase by 50%. “It is estimated that by 2026 the alternative investment sector will reach $23 billion in assets under management globally, according to Prequin,” Bestinver points out. The manager points out the possible origin of this growth: “Large net worth and individual investors represent only around 5% of alternative assets, a figure that is expected to double in the coming years.”
All this despite the fact that, as Eduardo Martín, from Andbank, points out, “2023 was not a good year for fund raising among Spanish private banking investors due to high interest rates on other assets.” However, he believes that “the alternative will probably continue to grow steadily among private investors.” Regarding its percentage in the alternative investment portfolio, Andbank specifies that it can vary significantly depending on the investor's profile. “It can range between 5% and 20%, although there is no general rule. The time horizon, the client's assets, the financial objectives and the risk profile are the main variables that modulate this objective percentage and it is advisable to have a qualified financial advisor who can help design a portfolio according to the specific needs and objectives of each customer".
A growth potential that, in the opinion of Ignacio Astorqui, partner at Afi, remains enormous, especially in Europe, and even more so in Spain, where investors began to invest in these assets later than in the US or the United Kingdom. . He points out that “private banks have been very active in offering investment in private markets. Solutions with high added value have been designed and structured, giving access to practically the entire investment universe through the best managers. We can say that, in general, private banks 'have done their homework well.'"
“Alternative investment – for Bestinver – aims to direct investment and savings towards assets and sectors of the real economy with great potential, less correlation with financial markets and providing greater balance to portfolios.” Astorqui admits: ”Today the investment universe is infinitely larger than that of listed companies. By not investing in private markets, we would be leaving aside a very relevant part of the global business fabric that, for the most part, is not listed on the stock market.”
For Casasus, from Abante, “investment in unlisted markets allows access to very interesting opportunities, not always accessible in listed markets.” Regarding its profitability, Andbank explains that “There is a great diversity of returns depending on the risk assumed. Most of them are in line with the initially estimated target returns, and we have had strategies that multiplied the estimated target returns by more than two.”
