Increasing Institutional Investor Activity in Europe

For the first time in nearly two decades, Europe captured over one-third of all global private capital, raising $311bn in the first nine months of the year. A massive shift in investor behaviour is underway. Why it matters: 🔸 Infrastructure is the star. Commitments to European infrastructure and natural resources hit $57bn by September and are on track to exceed $75bn by year-end, more than double last year. 🔸 Global investors are pivoting to Europe. US pension funds, endowments and major managers like KKR and Blackstone are boosting their European deployment at record levels. 🔸 Government action is reshaping capital flows. Germany’s €500bn infrastructure fund and policy momentum from leaders like Mario Draghi are triggering renewed confidence in European competitiveness. 🔸 Across asset classes, Europe is outperforming. Infrastructure, real estate, private credit and secondaries are all seeing stronger inflows than North America. Europe is no longer just an allocation it’s becoming the global priority for private capital. Read more here: https://lnkd.in/eJMdjV_u Financial Times

Two of the largest capital reallocations in recent months have been driven by sustainability. In March, a major UK pension fund moved $35bn from State Street to Amundi and Invesco in search of closer ESG alignment. This week, a Dutch pension fund withdrew €14bn from BlackRock for the same reason. More money flows are happening behind the scenes without making it to the news. These are not isolated moves but part of a wider rebalancing: European and Asian LPs are reshaping their portfolios around sustainability, especially as US asset managers face pressure from Washington’s anti-ESG stance to halt their sustainability programs. The political backlash in the US was meant to end sustainable finance. Instead, it is accelerating a structural trend that started long before President Trump’s election. Large fiduciary institutions under public scrutiny (pension funds, insurers) cannot ignore environmental and social risks without compromising long-term value. That is why the integration of sustainability is not a passing fad but the new investment baseline. History shows that market forces tend to outlast governments and their political agendas. Ironically, the US crackdown against sustainability has had one positive effect in Europe. By casting ESG as overreach and boosting the global competitiveness of the American economy, it has made Europe look foolishly over regulated, especially on the sustainability front. A much needed wake up call as ESG practitioners were facing the risk of letting compliance become an end vs. a mean to an end. The conversation is shifting back to fundamentals: sustainability not as a reporting exercise, but as a tool to strengthen corporate resilience and long-term competitiveness. This new capital flow is the latest evidence that sustainability has been redefining what investors expect from their managers. Can’t wait to see more news like this one, and excited to see the sustainability space coming to its senses and refocusing on value creation.

🌍✨ Diving into the world of #sustainabilitymanagement, one study at a time. Join me as I explore interesting research by brilliant minds, uncovering insights that could shape our future. 🌱🔍 Today: "The Impact of Mandatory Sustainability Reporting on Institutional Investment: The Role of Reporting Location Available to Purchase", published in The Accounting Review (see DOI at the end). This study examines whether mandatory sustainability reporting actually changes investor behavior, and it focuses on an important detail: where exactly the sustainability information is reported. The authors analyze the EU’s Non-Financial Reporting Directive, which since 2017 has required large listed companies to disclose environmental and social information. They find that foreign institutional investors increase their ownership in companies affected by this mandate. Crucially, the increase is much stronger in countries that require sustainability information to be included directly in the annual financial report rather than published separately in a stand-alone sustainability report. When sustainability and financial information appear in one place, investors seem more willing to invest across borders. The explanation is that combined reporting makes the information easier to find, more timely, and simpler to interpret alongside financial results. Stand-alone sustainability reports are often released weeks after financial statements and tend to mix investor-relevant data with marketing-style narratives. By contrast, integrated reports reduce the effort investors need to process information and make it easier to compare companies across countries. This reduction in information friction appears to matter especially for foreign investors, who face higher costs when investing abroad. Methodologically, the study uses a large quantitative analysis covering more than 600 EU firms and over 2,000 comparable non-EU firms. The authors apply a difference-in-differences research design, comparing changes in foreign institutional ownership before and after the reporting mandate. They supplement this with textual analysis and disclosure timing data to better understand why reporting location matters. The findings suggest that how sustainability information is embedded in corporate reporting can be just as important as what is disclosed. Integrating sustainability into core financial reporting may strengthen credibility, comparability, and investor engagement. And by the way: I did some experimental research in a related topic myself a couple of years ago (together with Daniel Reimsbach and published in the European Accounting Review). In case you are interested have a look here: https://lnkd.in/dq25tpMr Thanks to Mark DeFond, Mingyi Hung, and Emily Jing Wang for this interesting study! The picture shows first page from the article (DOI: 10.2308/TAR-2023-0276)

During Q3, we’ve had one of the strongest backdrops for capital markets since COVID – with equity markets at or near all-time highs, tight credit spreads, low vol, and rates poised to move lower. In my client conversations, there is an acknowledgement that activity is broadening and confidence among issuers and investors is building. Those ready to move have been rewarded.   🔹Equity and Equity-linked markets have regained momentum. The IPO market has been at its busiest in 18 months, with weekly volumes three to four times the recent average. Sponsor-backed pipelines are beginning to re-emerge, including some of the year’s most anticipated deals. Aftermarket performance has been differentiated, which is a healthy sign of investor selectivity. Convertibles have also rebounded, with issuance approaching record levels. In Europe alone, four new deals have launched mid-August – evidence of how attractive the product has become after a quiet period. 🔹Debt Markets have been similarly active. In leveraged finance, M&A and LBO financing now account for ~30% of institutional loan volume year-to-date, versus ~25% last year. Carve-outs, LBOs and cross-border deals are being well received, with oversubscribed books and, in some cases, negative concessions. In investment grade, technicals remain robust: spreads on the US IG index are near their tightest levels in over two decades, while September issuance topped ~$150bn which is one of the busiest on record. Issuers with 2026 funding needs are bringing supply forward to take advantage of the favorable backdrop.   From my perspective, Q3 has been defined by renewed issuer and investor confidence. Markets are well bid, and investors are engaged but appropriately selective. We expect a continuation of these market dynamics as we head into Q4.

In recent weeks, my colleagues Henry McVey and Aidan Corcoran traveled across Europe, meeting with business leaders, macro experts, and policymakers. Their latest report - 𝘛𝘩𝘰𝘶𝘨𝘩𝘵𝘴 𝘧𝘳𝘰𝘮 𝘵𝘩𝘦 𝘙𝘰𝘢𝘥: 𝘌𝘶𝘳𝘰𝘱𝘦 𝘢𝘯𝘥 𝘵𝘩𝘦 𝘔𝘪𝘥𝘥𝘭𝘦 𝘌𝘢𝘴𝘵 - captures a pivotal moment for Europe’s economic trajectory, with significant implications for long-term investors.   𝐄𝐮𝐫𝐨𝐩𝐞 𝐢𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠 𝐢𝐧 𝐢𝐭𝐬𝐞𝐥𝐟 𝐚𝐠𝐚𝐢𝐧. A wave of public investment is reshaping the region, particularly in infrastructure, energy, and advanced technology. These efforts signal a shift from fiscal restraint to strategic investment, creating a strong foundation for growth. 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐜𝐚𝐩𝐢𝐭𝐚𝐥 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐢𝐧𝐬𝐭𝐫𝐮𝐦𝐞𝐧𝐭𝐚𝐥. As governments work to modernize transportation, energy systems, and digital infrastructure, the opportunity for private investment has never been greater. Policies are increasingly designed to crowd in rather than crowd out private capital, unlocking opportunities to scale ambitious projects. 𝐌𝐨𝐦𝐞𝐧𝐭𝐮𝐦 𝐜𝐨𝐧𝐭𝐢𝐧𝐮𝐞𝐬 𝐭𝐨 𝐛𝐮𝐢𝐥𝐝. Europe’s economic outlook is improving, with upgraded growth forecasts, renewed focus on competitiveness and productivity, and an investment landscape that is more attractive than it has been in years. 𝐁𝐞𝐲𝐨𝐧𝐝 𝐄𝐮𝐫𝐨𝐩𝐞, 𝐭𝐡𝐞 𝐌𝐢𝐝𝐝𝐥𝐞 𝐄𝐚𝐬𝐭 𝐢𝐬 𝐚𝐥𝐬𝐨 𝐬𝐞𝐞𝐢𝐧𝐠 𝐬𝐭𝐫𝐨𝐧𝐠 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐨𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬. As the region continues to diversify and grow, there is a compelling case for private capital in infrastructure and private lending, areas where long-term investors can play a crucial role.   At KKR, we have been investing in Europe for over 25 years, and today, more than ever, we see compelling opportunities across asset classes. The transformation underway is significant — and private capital has a key role to play.   Read the full report here: https://go.kkr.com/4iEjJ4e  

From Stockholm to London, the data tells a story that's reshaping European private equity. While it's not news that Nordic investors are long-time, significant investors in private markets and alternatives, Nordic institutions are averaging 12% private equity allocations while UK schemes sit at 7%, the real story is in the strategy shifts we are seeing. What caught my attention: Danish institutions writing €1-20M co-investment tickets, Swedish foundations embracing GP-led secondaries, and UK DB schemes using LTAFs for deployment flexibility. The institutions thriving aren't just adjusting portfolios, they're building flexibility into their entire approach. Sometimes the most important trends happen quietly, in the spaces between the headlines. This came through in our latest ‘Private equity trends’ report tracking holding periods, deal activity and allocator behavior: https://lnkd.in/e7neQTiR  #PrivateEquity #EuropeanMarkets With Intelligence

PE Investors are investing more outside of Germany and the UK. And for the right reasons. UK and DACH are bottom of the pack for most investment metrics. Growth is slow and margins are not that great too. So, where are new investments going? Into Southern European regions (France, Italy, Spain) and CEE. If you look at the metrics (scorecard below), France shines on high profitability, CEE on high growth, and Italy on low multiples. France is a big hub for Services businesses (27% of assets), Italy for Industrials (37%), and CEE for Consumer plays (29%). Only this month, Hg made its first platform investment in Iberia (CTAIMA and e-coordina deal) KKR is thinking of opening an office in Milan. France, is home to 41 of the largest 250 global investors in Europe (just behind UK's 44), led by Ardian and PAI Partners. It's happening. #investors #pe #assets #scorecard

What a time to be in Venture Capital in Europe. “We have reached the point where, without action, we will have to either compromise our welfare, our environment, or our freedom." A humbling statement from Mario Draghi this Monday (Sep 9th) in his highly anticipated report on European competitiveness: https://lnkd.in/eCCQ2zR2. While the challenges are clear, the situation also presents a unique opportunity: investing in European innovation has never been better. Why? As Draghi says, the aging population and corresponding demographic changes are fueling an urgent need for innovation: without boosting productivity, Europe’s economy by 2050 could stall to the point where it looks much like it does today. Draghi’s call to action? Back Venture Capital. His proposal is music to my ears: ⚖ Regulatory and Structural Reforms: Implement tax incentives and reduce regulatory barriers to encourage pension funds and insurers to invest in VC, while integrating capital markets to channel household savings into productive investments. 🤝 Public Sector Initiatives: Expand the role of public financial institutions like the European Investment Fund (EIF) to enhance VC funding, including the creation of a fund-of-funds to attract institutional investors. 🌐 Focus on Strategic Sectors and Ecosystem Development: Target investments in key areas such as AI and clean technology, while fostering a more connected and inclusive investor community to address the scale-up financing gap. Europe has already proven to be a major source of innovation. As Draghi himself said, “The problem is not that Europe lacks ideas or ambition (…) but that innovation is blocked at the next stage: we are failing to translate innovation into commercialization.” With the urgent need to address demographic shifts, the rise of key enablers like AI and Industry 4.0, and the massive institutional push to support innovation, the opportunity ahead for Venture Capital is immense. If Draghi’s report signals anything, it's that the potential for European innovation has never been greater. Yesterday, I attended the Deutscher Kapitaltag event in Berlin, organized by BVK Bundesverband Beteiligungskapital. I was so encouraged by the honest debates about Germany’s and Europe’s challenges in the Venture Capital space, but equally the optimism and constructive debate.  I feel a tidal wave of change is coming, and the moment for investing in European innovation is now. What do you think of Draghi’s report? How will the European Venture Capital ecosystem adapt? I’m working on something new, and any comments or thoughts are always welcome!

Private equity firms are zeroing in on Europe, seizing opportunities amid economic challenges and undervalued companies. In 2024, large buyout deals in Europe surged 78%, outpacing the rest of the world with $133 billion in deals. Why? Depressed valuations, a strong US dollar, and Europe’s fragmented yet diverse market create prime opportunities for private capital. Deals like Thoma Bravo’s acquisition of Darktrace and Brookfield's stake in Neoen highlight this trend. For investors, it's a reminder of the value of looking beyond immediate economic headwinds to uncover hidden opportunities. #PrivateEquity #BusinessStrategy #GlobalMarkets

Apollo Global Management, Inc. just dropped a comprehensive take on Europe’s private credit evolution and what to expect moving forward — and it’s a must-read. The opportunity isn’t theoretical. It’s measurable, accelerating, and becoming too large to ignore. → Europe still offers a spread premium of 25–50 bps over the U.S. — a rare edge in today’s environment. → Private credit issuance reached a record €85B in 2023, yet banks still account for 88% of lending, leaving enormous whitespace. → Regulatory shifts like Basel III and the Capital Markets Union are finally laying the groundwork for a more credit-friendly Europe. → Asset-backed finance is rising rapidly, particularly across infrastructure, equipment, and real estate. Firms that succeed here will need to navigate fragmentation, regulation, and cultural nuance, without compromising on speed or performance. That shift is opening the door for private lenders to move in... and fast. But speed alone isn’t the differentiator. Coordination, infrastructure, and local expertise will play a critical role in determining success or failure. “𝘞𝘦 𝘣𝘦𝘭𝘪𝘦𝘷𝘦 𝘌𝘶𝘳𝘰𝘱𝘦𝘢𝘯 𝘱𝘳𝘪𝘷𝘢𝘵𝘦 𝘤𝘳𝘦𝘥𝘪𝘵 𝘪𝘴 𝘢 𝘧𝘢𝘴𝘵-𝘨𝘳𝘰𝘸𝘪𝘯𝘨 𝘮𝘢𝘳𝘬𝘦𝘵 𝘸𝘪𝘵𝘩 𝘵𝘩𝘦 𝘱𝘰𝘵𝘦𝘯𝘵𝘪𝘢𝘭 𝘵𝘰 𝘳𝘪𝘷𝘢𝘭 𝘪𝘵𝘴 𝘜𝘚 𝘤𝘰𝘶𝘯𝘵𝘦𝘳𝘱𝘢𝘳𝘵, 𝘰𝘧𝘧𝘦𝘳𝘪𝘯𝘨 𝘴𝘤𝘢𝘭𝘦, 𝘢𝘵𝘵𝘳𝘢𝘤𝘵𝘪𝘷𝘦 𝘳𝘪𝘴𝘬-𝘢𝘥𝘫𝘶𝘴𝘵𝘦𝘥 𝘳𝘦𝘵𝘶𝘳𝘯𝘴, 𝘢𝘯𝘥 𝘨𝘦𝘰𝘨𝘳𝘢𝘱𝘩𝘪𝘤 𝘥𝘪𝘷𝘦𝘳𝘴𝘪𝘧𝘪𝘤𝘢𝘵𝘪𝘰𝘯.” - Apollo, June 2025 With this much capital in motion and institutional appetite climbing, Europe is becoming the market to watch. Read the full whitepaper here: https://lnkd.in/e-WeKcnJ