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European equity and private asset markets

Europe’s economic comeback

Alternatives 2 min read
Investors worldwide have sizable exposure to US assets, particularly those that own global funds. Could Europe’s improving economic prospects offer diversification benefits for over exposed portfolios?
Written by

Senior Economist at Pictet Asset Management, Sabrina Khanniche, believes that Europe’s public and private assets could offer a route to a better diversified portfolio, one that’s fit for a less US-centric world.

Germany’s fiscal boost, coupled with region-wide increases in public spending are driving a revival of Europe’s economy. Sabrina forecasts that the pace of growth of the eurozone economy will more than double over coming years.

In this paper, she and other Pictet Asset Management investment experts explain how major public investment initiatives and capital market and labour reforms are brightening Europe’s economic prospects.

Key points

  • European equities: poised for a significant re-rating

    • European equities are expected to narrow their valuation gap with US equities. The discount at which European stocks trade relative to their US counterparts is likely to halve, as regulations and tax regimes become more business-friendly and growth industries expand.

  • Europe’s private assets come of age

    • European private equity has returned about 20% more than its public market equivalents over the past 20 years according to a McKinsey study.
    • European private equity offers less crowded market conditions and diversification for investors whose exposure to North America has climbed in recent years.
    • At over EUR 500 billion, Europe’s private debt market has been on a high growth trajectory, almost doubling in size in the last four years.
    • For European real estate, a stronger economy could mean higher rental growth, strengthening already positive dynamics.
Footnote

Important information

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The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments or services. The information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any products or services offered or distributed by Pictet Asset Management. Pictet Asset Management has not ensured the suitability of the securities mentioned in this document for any specific investor, and it should not be relied upon as a substitute for independent judgment; investors are advised to determine the suitability of the investment based on their financial knowledge, experience, goals and situation, or to seek specific advice from an industry professional before making any investment decisions. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. Investors may not get back the amount originally invested.