February 22, 2023 | Stamford, CT — One-quarter of European institutional investors expect to hire a new manager for alternative asset classes in the next year—a hiring rate that would accelerate an already historic shift in investment strategy and portfolio composition. 

Alternative asset classes represent about 7% of institutional assets in Europe and allocations are expected to expand further in the months and years ahead. This same trend is seen in plans for new manager hiring as the share of institutions with plans to hire a new external manager for alternative asset classes increased from 9.5% in 2020 to 15% to 25% in 2022. 

“Rarely in our research do we see such a large share of institutions in a region all planning to hire in unison,” says Sophie Emler, Senior Relationship Manager at Coalition Greenwich and co-author of Continental European Institutions Accelerate Move into Alternatives.

ESG Best Practices Starting to Take Shape 
Institutional investors in Europe are moving towards a set of policies and practices that are gradually forming into a set of universal best practices for ESG. About three-quarters of institutional investors in the region have integrated ESG criteria into their initial manager screens or into the preliminary due diligence process and are filtering out managers without a credible ESG strategy, or managers whose ESG policies and practices fall short of expectations. 

“Institutional investors in Europe believe that alternatives are one of the asset classes most in need of greater alignment with their ESG principles,” says Mark Buckley, Head of Investment Management at Coalition Greenwich and report co-author. 

2022 Greenwich Quality Leaders in Continental Europe Institutional Investment Management
The 2022 Greenwich Quality Leaders in Continental Europe Institutional Investment Management are Allianz Global Investors and J.P. Morgan Asset Management. Although these firms differ in terms of their offerings, they both deliver outstanding client service—a feature particularly prized by institutional investors in a year of market volatility. 

Germany: Trends and 2022 Greenwich Quality Leaders in German Institutional Investment Management
Relative to their peers across Europe, German institutions remain highly concerned about their ability to hit target rates of return and meet funding requirements. Approximately 45% of the German institutions cite rates of return and funding issues as a primary issue for the year ahead.

Despite this difference in priorities, German institutions’ expectations for their portfolios are largely in line with those of institutions elsewhere in Europe. Nearly half of German institutions plan to increase allocations to each of infrastructure debt and equity over the next three years. More than 35% plan to make meaningful increases to private debt allocations, and about a third plan to expand allocations to private equity.

The 2022 Greenwich Quality Leaders in Overall German Institutional Investment Management are Allianz Global Investors and Union Investment.