Global Alternatives Markets Likely To Exceed $30 Tn By 2030: Preqin

The global alternatives industry is likely to reach USD 29.2 trillion in assets under management (AUM) by 2029, from USD 16.8 trillion at the end of 2023, according to the ‘Future of Alternatives 2029’ report by Preqin, a London-based investment data company.

While not part of the official report forecasts, the analysis predicts the industry is on course to exceed USD 30 trillion in AUM by 2030. This signifies an annualised growth rate of 9.7 per cent in the forecast period, 2023-end to 2029, which represents a slowdown from 10.5 per cent during the 2017–2023 period due to softer expectations for the private equity and venture capital markets.

Private wealth and weak exit markets are expected to drive secondaries to an annualized growth rate of 13.1 per cent, with secondaries forecast to be the fastest-growing area of alternatives from 2023-end to 2029. Currently, the secondaries market remains a buyer’s market, as investors’ portfolios face liquidity constraints. Preqin anticipates ongoing demand for secondaries strategies from the private wealth channel, as they offer inherent advantages for investors that are new to private markets.

“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. While policy rates are expected to decline, macroeconomic conditions are likely to remain more challenging than during the pre-pandemic era, and our forecast of slower industry growth reflects that. Investors are navigating evolving geopolitical risks as we move towards a multipolar world order – which presents a new set of investment opportunities and risks," said Cameron Joyce, Global Head of Research Insights, Preqin.

Private Equity Market 
The report mentioned that private equity is predicted to remain the largest private capital asset class, with Preqin forecasting it is on course to more than double in AUM from 2023-end to 2029, from USD 5.8 trillio to USD 12.0 trillion, at an annualised growth rate of 12.8 per cent. 

Notably, Preqin analysts believe the asset class should represent approximately 6.0% of public and private equity markets by the end of 2024. This percentage is expected to increase over time, owing to a combination of factors, including private companies staying private for longer, take-privates, lacklustre IPO markets, and an overall decline in the number of listed companies over time. 

Fundraising is expected to remain challenging, but growth is forecast to pick up from 2027, supported by increasing interest from private wealth investors who currently have a relatively low exposure to private equity. However, performance over the forecast period is expected to be softer than it has been, with global private equity projected to have a lower internal rate of return (IRR) compared with 2017-2023, falling to 13.4 per cent from 15.5 per cent.

Meanwhile, private debt’s performance is forecast to improve, as led by distressed debt. Preqin believes the 2017-2023 average IRR of 8.1 per cent should rise to 12.0 per cent in 2023-2029F for private debt overall, with distressed debt to average 13.4 per cent for the period. However, the difference in performance between private debt overall and distressed debt is expected to narrow, as the global economy moves towards a relatively more settled credit environment. 

According to the report, private debt AUM is forecast to rise from USD 1.5 trillion at 2023-end to USD 2.6 trillion by 2029.