The combined impact of climate change, geopolitical tensions and social tensions are creating a volatile environment for policymakers and the investment industry alike. At a recent Funds Europe Luxembourg panel, Cuan Coulter was joined by other industry experts from KPMG, HSBC Securities Services and Linklaters Luxembourg to discuss how the European Long-Term Investment Fund (ELTIF) 2.0 has gained momentum, and how investments in other asset classes are faring.

Private markets allocations continue to see growth with significant interest from existing asset managers. However, in public markets, there has been a “risk-off” sentiment since February – according to our proprietary data, which showed that money market funds received inflows as investors sought relative safety. In the real estate space, the panelists noted that there was a slowdown in terms of growth and transactions. However, they observed positive trends in infrastructure, private equity and private debt.

Meanwhile, Coulter noted that ETFs continued to attract inflows from mutual funds, adding that sentiment for China – as indicated by flow data – was “much cooler” than last year but that emerging markets, in general, were still a trade people were prepared to make.

While we still await clarity on the details of the ELTIF regime, the panelists noted that the industry is optimistic about ELTIF 2.0. They closed their discussion by establishing that against a backdrop of changing investor demands and uncertain markets, asset managers are seeking to achieve the best possible returns for investors.

This article was originally published in Funds Europe in September 2023.