“Global alternatives markets continue to evolve rapidly, especially as individual investors’ access opens up, as the private wealth channel’s growth continues to gather pace,” said Cameron Joyce, global head of research insights at Preqin, in a press statement on Wednesday 18 September. Photo: Preqin

“Global alternatives markets continue to evolve rapidly, especially as individual investors’ access opens up, as the private wealth channel’s growth continues to gather pace,” said Cameron Joyce, global head of research insights at Preqin, in a press statement on Wednesday 18 September.  Photo: Preqin

The global alternatives industry is on track to exceed $30trn by 2030, driven by strong growth in private equity and secondaries, according to Preqin.

Preqin, a provider of research and data on alternative assets, has predicted that the global alternatives market will grow at an annual rate of 9.7% from 2023 to 2029, with private equity expected to more than double in size. The outlook, published in the ‘Future of Alternatives 2029’ report on 18 September 2024, forecasts that the global alternatives industry will reach $29.2trn in assets under management (AUM) by 2029, up from $16.8trn at the end of 2023. The analysis indicates that the industry is on track to exceed $30trn by 2030. This growth represents an annualised rate of 9.7% from 2023 to 2029, slightly slower than the 10.5% growth recorded between 2017 and 2023, due to more modest expectations for the private equity and venture capital sectors.

Preqin’s research shows that secondaries are expected to be the fastest-growing sector within the alternatives market, with an anticipated annual growth rate of 13.1% from 2023 to 2029. This growth is driven by increased private wealth investment and liquidity constraints in investor portfolios, making the secondaries market favourable to buyers. Preqin projects that rising demand from private wealth channels will further support secondaries, offering an appealing entry point for investors new to private markets.

Private equity

Private equity, forecast to remain the largest segment within private capital, is projected to more than double its assets under management, increasing from $5.8trn at the end of 2023 to $12trn by 2029. Preqin expects private equity to grow at an annualised rate of 12.8%, despite potential fundraising challenges that may persist until 2027. The firm estimates that private equity could account for approximately 6% of both public and private equity markets by the end of 2024, with this proportion expected to rise over time due to factors such as companies remaining private longer, a decline in initial public offerings and a reduction in the number of listed companies globally. However, performance is anticipated to weaken, with the global private equity internal rate of return (IRR) projected to fall from 15.5% during the 2017-2023 period to 13.4% for the 2023-2029 forecast.

Private debt

Preqin forecasts that private debt will see an improvement in performance, driven by distressed debt strategies. While private debt had an average internal rate of return (IRR) of 8.1% between 2017 and 2023, this is expected to increase to 12.0% for the 2023–2029 period. Distressed debt, in particular, is forecast to achieve an average IRR of 13.4%. As the global economy stabilises, the performance gap between private debt and distressed debt is expected to narrow. Additionally, private debt AUM are projected to grow from $1.5trn at the end of 2023 to $2.6trn by 2029, highlighting the sector’s continued appeal.

Venture capital

Venture capital is projected to grow steadily, with artificial intelligence playing a crucial role in driving early-stage investment. The report forecasts that early-stage venture capital will experience an annualised AUM growth rate of 13.2%, followed by general venture capital at 11.1% over the same period. However, late-stage venture capital is expected to grow more slowly, at 8.1%, due to challenges in the exit environment, asset valuations, and increased regulatory scrutiny over mergers and acquisitions.

Real estate and infrastructure

The global private real estate market is expected to recover from a dip in 2023, with AUM rising from $1.6trn to $2.7trn by 2029. Preqin’s models predict that value-added strategies will see the largest performance improvement, with IRR increasing by 2.1 percentage points to 9.6% during the forecast period.

In the infrastructure sector, AUM is forecast to reach $2.4trn by 2029, driven by the energy transition and increased fundraising activity from 2027 onwards. Infrastructure is expected to close the gap with real estate, with AUM projected to reach 88% of the real estate segment’s level by the end of 2029.

Hedge funds

Hedge funds, predicted to reach $5.7trn in AUM by 2029, will experience slower growth compared to other alternative asset classes. Preqin forecasts a modest annualised growth rate of 4.0% for hedge funds over the 2023-2029 period, with outflows expected to impact performance-based growth.

Cameron Joyce, global head of research insights at Preqin, commented on the evolving nature of the global alternatives market, noting that while individual investors’ access to private markets is expanding, macroeconomic conditions remain challenging compared to the pre-pandemic era. Joyce pointed out that while policy rates are likely to decline, geopolitical risks and a shift towards a multipolar world order present both new opportunities and challenges for investors.

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