Fund manager searches for private markets declined in 2024 to 43% of client mandates, down from 58% in 2022, according to bfinance.
Despite the decrease in searches, the average institutional investor has continued to increase overall illiquid exposure in the past year. The rate of increase has started to slow, as bfinance claims investors approach “new exposures with evident caution.”
Private debt and private equity have seen particularly aggressive search downturns in the past year. Equity decreased from 24% in 2023 to 19% in 2024, while debt dropped from 43% to 35%. Yet real assets returned to investor favour with searches for real estate and natural capital jumping from 18% to 23%, and infrastructure from 12% to 19%.
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“Private equity fundraising remains challenging, with extended timelines across the board as investors prioritise core relationships. The outlook for 2025 will depend on geopolitical stability, interest rate trends, and a sustained recovery in IPO markets,” bfinance said.
“Private debt strategies continue to provide steady income with relatively low volatility, maintaining their role as a key portfolio component for LPs. Proprietary data indicates that while approximately 22% of borrowers experienced EBITDA declines, overall company health remains sound, with a weighted average Interest Coverage Ratio of 2.1x.”
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Private equity held its place as the most popular private asset class, making up 68% of fundraising in the final quarter of 2024. But it raised just $114bn in Q4, coming in 54% below the five-year quarterly average. Debt also fell sharply, to $25bn in the fourth quarter from $62bn in the third, while real estate managed just $10bn in fundraising.
“The final quarter of 2024 marked the weakest period for private markets fundraising since 2015, with all four sub-sectors — Private Equity, Private Debt, Infrastructure, and Real Estate — facing challenges,” bfinance said.
“Persistent macroeconomic uncertainty, inflation exceeding targets in multiple regions, the US elections, and scaled-back expectations for interest rate cuts in 2025 weighed on investor sentiment.”
But tides have turned again in early 2025, leading towards a resurgence in investment activity as M&A volumes are projected to increase. The changes in the market have led bfinance to begin reporting the flows for semi-liquid and evergreen funds on a semi-annual basis.