Further consolidation set to accelerate new manager launches

The European private markets industry is undergoing a significant transformation, characterised by increasing consolidation among managers. And while this has the effect of absorbing smaller GPs into larger, global entities, it is also responsible for generating spin-outs and new fund launches, including hyper-specialists with specific domain expertise.  

This consolidation shift is driven by a confluence of factors, including a maturing market, evolving regulatory landscapes, and the growing demand for scale and specialised expertise. While consolidation might initially appear to limit opportunities, it is, in fact, creating a more sophisticated and resilient ecosystem that presents unique and compelling investment avenues for discerning investors.

Cross-border and multi-strategy expansion is intensifying, as leading managers seek pan-European reach and sectoral breadth. However, scale remains the primary catalyst of consolidation.

Leading GPs are executing acquisitions to grow AUM, diversify revenue streams, and reinforce market positioning. The top 100 GPs have executed three times as many peer acquisitions in the past five years as in the previous five, prioritising network reach, deal sourcing, and operational depth.

Regulatory tightening, especially in the banking sector, has constrained traditional lending, accelerating the expansion of private credit and further industry consolidation. Firms are seeking both compliance scalability and operational efficiency to navigate the increasingly complex regulatory landscape. In addition, limited partner expectations for transparency, liquidity, and consistent returns have resulted in a flight to quality in the post-pandemic period of the last few years.

The Price is Right

In spite of this, smaller and niche funds remain compelling, especially hyper-specialists.

Kim Pochon is Head of Primary Investments at Unigestion, where its Private Equity division has been backing emerging managers since the early 90s.

“We see this current era of hyper-specialisation continuing.” says Pochon. “Not only do we anticipate sector specialisation, but also the evolution of sub-sector specialisations. Mega trends are of course very relevant for private equity investors, but there is a need to distinguish the opportunistic player from the seasoned professional. This is precisely where we see hyper-specialisation coming into play.”

In Pochon’s view, sector specialists can not only provide strong returns but also provide a level of downside protection.

“In our experience, we have found that having a specialisation allows for fund managers to discover interesting, hard-to-access deals at the right price. Equally, when things go wrong or become complicated, we tend to find that specialists are better equipped than generalists to deal with difficult situations. As such, we find specialisation excellent for alpha generation, as well as providing less risk.”

Investors who allocate to emerging managers, including hyper-specialists, seek to benefit from:

Targeted Exposure: Gaining precise exposure to high-growth sectors or underserved markets that may not be a primary focus for larger, more diversified funds.

Higher Alpha Potential: Niche managers, due to their agility and specialised focus, can be more selective in their investments, potentially leading to higher alpha generation.

Access to Unique Deal Flow: These managers often have proprietary deal flow within their domain of expertise, providing access to unique opportunities that are not typically available to generalist investors.

Buoyant launch activity

European private markets continue to be populated by emerging fund managers.

Mid-market fundraisings outpaced those of large funds in 2024. As reported by Funds Europe, citing Preqin data, last year 49% of private equity investors said they planned to target small and mid-market buyout funds. This underscores demand for targeted strategies. Specialist managers offer precise sector exposure, greater alpha potential through selectivity, and access to proprietary deal flow unavailable to generalists.

Over the last 12 months, several notable fund launches have occurred across Europe, signaling continued dynamism and opportunity.

For instance, in the venture capital space, Q4 2024 saw a number of significant new funds. Cogito Capital Partners, based in Warsaw and New York, announced the first close of its second fund, Cogito Fund II, with over EUR90 million secured, focusing on European enterprise tech companies with a Central European presence.

Additionally, Axeleo Capital in Lyon achieved the first close of its EUR250 million Green Tech Industry I Fund, raising EUR125 million to back industrial startups driving innovation in renewable energy, sustainable materials, green mobility, and agriculture across Europe.

In the UK, notable launches over the last 12 months include Corinthia Global Management (an ex-Barings team spinout), immediately raising USD5 billion for its direct lending strategy, and Kimmik Capital, led by Julien Farre, formerly of Angelo Gordon. The firm is targeting GBP300 million to GBP500 million for its debut opportunistic credit fund.

Such launches underscore the continued appetite for specialised, impact-oriented investments, as well as the ongoing growth in European/global private credit markets. Indeed, this asset class is the most active for new launches. As reported by Portfolio Adviser, over 60% of surveyed fund managers report launching or planning launches in this space in the next year.

Hitting the Growth Ceiling

Alvine Capital is a specialist European placement agent. The firm has been supporting GPs in their European fundraising efforts for two decades and in recent years it has seen increasing appetite for emerging managers from European LPs as they seek to drive alpha in their private markets’ portfolios.

“It’s our mission to stay at the forefront of emerging strategies. We have worked with some exceptional spin-off teams from the likes of Blackstone, Silver Lake and KKR, mostly investing in the lower middle/middle market, which have been well received by European institutional investors,” comments Alec Lingorski, Managing Director, Alvine Capital.

He says that as consolidation in private equity accelerates, it’s also pushing top talent to spin out and launch their own firms:

“Many star managers are hitting growth ceilings at the large platforms and feel ready to set out on their own. When it comes to assets in private markets, bigger doesn’t mean better. These new funds tend to be more nimble, highly specialised, and set up to deliver outsized returns.”

In the short term, the consolidation trend is likely to cause fundraising challenges for emerging managers. Yet, at the same time, it could potentially lead to an increased number of spin outs, especially as the larger firms chase ever-larger deals and experience more complicated governance and team dynamics.

“Spin outs, however, can create an opportunity for emerging managers, particularly when it comes to sector specialisation. Inevitably, during the consolidation process, talented investment professionals can become trapped in the middle and look for a way out. We find that spin outs, particularly those with a focus on sector specialisation, is an increasing trend,” concludes Pochon.