Preqin, the global leader in alternative assets data, tools, and insights, has released its Future of Alternatives 2029 report, predicting significant growth in the private equity market and the secondaries sector. According to the report, the global alternatives industry is expected to reach $29.22tn in assets under management (AUM) by 2029, more than doubling from $16.78tn at the end of 2023.
The private equity market is projected to be the largest private capital asset class, with Preqin forecasting a growth in AUM from $5.80tn to $11.97tn by 2029, representing an annualized growth rate of 12.82%. This growth is attributed to factors such as private companies staying private for longer, lackluster IPO markets, and a decline in the number of listed companies.
While private equity is set to experience significant growth, the report also highlights the strong performance expected in the secondaries market. Secondaries are predicted to be the fastest-growing area of alternatives, with an annualized growth rate of 13.07% from 2023 to 2029. The liquidity of the secondary market is expected to support the growing operation of the private wealth channel, driving demand for secondaries strategies from private wealth investors.
In terms of performance, the report suggests that private debt’s performance will improve, led by distressed debt. The average internal rate of return (IRR) for private debt is projected to increase from 8.1% in the period of 2017-2023 to 12% in 2023-2029. However, the difference in performance between private debt overall and distressed debt is expected to narrow as the global economy stabilizes.
Other key findings from the report include the expected growth in venture capital, driven by factors such as artificial intelligence, and the steady growth of global private real estate and unlisted infrastructure AUM. Hedge funds, on the other hand, are predicted to have the slowest growth rate among alternative asset classes.
Cameron Joyce, Global Head of Research Insights at Preqin, emphasized the evolving nature of global alternatives markets and the challenges investors face in navigating geopolitical risks. He also highlighted the increasing interest from private wealth investors, which is expected to support the growth of the industry.