The global alternatives industry is poised to exceed US$30 trillion in assets under management by 2030, up from US$16.8 trillion at the end of 2023, a new report forecasts.

Preqin, a London-based alternative assets data and research provider, says the industry is growing at an annualized growth rate of 9.7% during the period (end-2023 to 2029), which is actually a slowdown from 10.5% in 2017–2023 due to softer expectations for the private equity and venture capital markets.

According to Preqin’s Future of Alternatives 2029 report, private wealth and weak exit markets are expected to drive secondaries to an annualized growth rate of 13.1%, with secondaries forecast to be the fastest growing area of alternatives from end-2023 to 2029.

Currently, the secondaries market remains a buyer’s market, as investment 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,” says Cameron Joyce, global head of research insights at Preqin.

“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.”

Private equity tops 

Still, private equity is predicted to remain the largest private capital asset class, with Preqin forecasting it to more than double in AUM from US$5.8 trillion in end-2023 to US$12.0 trillion in 2029, at an annualized growth rate of 12.8%.

Preqin analysts believe the asset class should represent approximately 6.0% of public and private capital 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.

Fund raising 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% from 15.5%.

Meanwhile, private debt’s performance is forecast to improve, as led by distressed debt. Preqin believes the 2017–2023 average IRR of 8.1% should rise to 12.0% in 2023-2029 for private debt overall, with distressed debt to average 13.4% 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. Overall, private debt AUM is forecast to rise from US$1.5 trillion at end-2023 to US$2.6 trillion by 2029, Preqin says.