Private markets are anticipated to make up 30% of all assets under management by the year 2032, according to management consulting firm Bain & Company.
The research estimated private market assets under management to reach between $60trn to $65trn by 2032, with a compound annual growth rate (CAGR) of 9% to 10%. Private equity and venture capital are believed to remain the two largest categories, but Bain expects an expansion of private alternative credit at 10% to 12% CAGR and infrastructure at a CAGR of 13% to 15%.
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Markus Habbel, global head of Bain’s Wealth & Asset Management practice, said: “Wealth and asset managers are now favouring private markets because the business models that have dominated asset management for years have nearly run their course. Private assets constitute a much larger market than public assets and offer potentially higher yields, diversification, and in cases such as real estate—a hedge against inflation.”
The momentum of private markets is being picked up by retail investors, with 16% of 2022’s retail AUM made of private markets. Bain expects this to increase to 22% by 2032. Yet as the industry grows, Bain estimated fee revenue doubling to 2032, reaching $2trn.
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“Individuals are drawn to the alternative asset market by the prospect of diversification and higher returns and are therefore willing to tolerate lower liquidity,” said Habbel. “In response to this demand, leading companies have launched innovative offerings such as intermittent liquidity products for retail investors.”
Habbel said in order for asset managers to capitalise on the growth, they will need to create a niche product and be able to offer large-scale production. He recommended a redesign of front-to-back office operations to allow for the differences in private and public market systems, sales representatives with thorough knowledge of the market, and M&A integration skills.
