Charities turn to alternatives

European charities are restructuring their investment portfolios to increase their exposure to private equity, according to fresh research

Charities in Europe are bolstering their commitments to private equity and other alternative asset classes, a survey from research firm Cerulli Associates said.

Nearly one-third of European charities, which together hold a total of $109.3 billion in assets, have even restructured their investment portfolios to increase their exposure to alternatives since 2008.

“The conclusion must be that for asset managers with a proven track record in alternatives there are some terrific opportunities within the sector,” Barbara Wall, Europe research director at Cerulli Associates said in a statement. “Alternatives often have lower correlations with traditional equity and fixed income [and] a growing number of charities are beginning to rely on them.”

Charities entering private equity as investors will likely buoy GPs collecting capital in a good fundraising environment. In the first six months of 2014, commitments to closed funds totalled $190 billion, according to PEI’s Research & Analytics division.

This suggests that GPs are likely to match, if not exceed, fundraising levels from last year, when funds globally amassed approximately $420 billion – the highest figure since the financial crisis.

“At the midway point of 2014, we are witnessing a private equity fundraising world in good health, in most parts of the world. We are particularly seeing Asia-focused private equity picking up again, and investors keen on opportunities in Africa,” said Dan Gunner, director of Research and Analytics at Private Equity International.

Historically, more funds close in the second half of any given year. And with some still to announce H1 closings, “it looks highly likely” 2014 will be the strongest fundraising year for the asset class since 2008, the study suggested.