Alternative investment managers’ combined assets under management grew 5.1% to an all-time high of $7.4 trillion in 2020, despite a 21.4% year-over-year drop in fundraising worldwide, according to a McKinsey & Co. report.
Global alternative investment funds raised $857.9 billion in 2020. Most of the capital went to private equity funds, with $502.9 billion in 2020, down 21.8% from a year earlier. Closed-end real estate fundraising had the largest decline in 2020 falling 31.7% to $130.2 billion. Private debt funds raised $124.4 billion, down 6.7%; and natural resources and infrastructure funds raised $100.4 billion, down 19.1%.
Private equity posted the best performance vs. any alternative investment asset class in the nine months ended Sept. 30, with a trailing pooled net internal rate of return of 10.5%. Infrastructure was the next best performing alternative investment asset class at -1.3% trailing pooled net IRR, followed by private debt at -2.1%, closed-end real estate at -4.2%, and natural resources, -16.7%.
Private equity funds raised between 2007 and 2017 also outperformed other alternative investment asset classes of the same vintages. The median net IRR of private equity funds raised over that 10-year period was 13.3%, compared with 9.3% for closed-end real estate funds, 8.7% for private debt, 7.5% for infrastructure and 0.4% for natural resources.