Secondaries is expected to see fastest growth while PE and VC weaken
The global alternatives market is set for strong growth in the next few years, reaching $29.2 trillion by 2029 and up from just short of $17 trillion at the end of 2023.
Further gains could push the market beyond $30 trillion by 2030, although this is not part of the official forecast from industry analysts at Preqin for its Future of Alternatives 2029 report.
Looking at growth from 2023-2029 the report calls for an annualized rate of 9.7%, down from the 10.5% annualized growth rate between 2017 and 2023 as private equity and venture capital markets weaken.
Private equity will remain the largest sector of the alternatives market with Preqin forecasting it is on course to more than double in AUM from 2023-end to 2029, from $5.8tn to $12.0tn, at an annualized growth rate of 12.8%, and should represent approximately 6.0% of public and private equity markets by the end of 2024.
Secondaries are expected to be the fastest growing alternatives sector in the forecast period at 13.1% driven by private wealth and weak exit markets. Secondaries is a buyer’s market currently due to liquidity constraints in investors’ portfolios and the private wealth channel is expected to drive ongoing demand.
“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. “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.”
Among other key points from the report are that AI will fuel early-stage venture capital with annualized AUM growth at 13.2%, followed by venture (general) at 11.1%, from end-2023 to 2029. Global private real estate AUM is forecast to continue its steady growth to $2.7 trillion by 2029, and global unlisted infrastructure AUM is forecast to reach $2.4 trillion in 2029, aided by fundraising and deals related to energy transition.
Meanwhile, global hedge funds AUM is forecast to surpass $5.7 trillion by 2029 although outflows are predicted to impact performance-based growth.
