Private market assets under management will reach a range of between $60 trillion to $65 trillion by the year 2032 — increasing at more than twice the rate of public assets — according to new research by global consultancy firm Bain & Co. issued on Aug. 21.
Bain's analysis, “Avoiding Wipeout: How to Ride the Wave of Private Markets,” shows that by 2032, private assets will grow by a 9% to 10% compound annual growth rate, accounting for 30% of all AUM by the end of that time period.
Bain also estimates that fee revenue for private market investments should more than double to $2 trillion by 2032 from $900 billion in 2022, with private equity and venture capital remaining the largest asset categories.
In addition, private alternative credit is expected to expand at a 10% to 12% CAGR through 2032, largely reflecting banks issuing fewer loans. Meanwhile, private infrastructure assets will likely maintain a 13% to 15% CAGR growth pace over the next decade. This growth is expected to stem from a shortage of public funds as government deficits widen.
Moreover, Bain projects that institutional investors are expected to increase their allocation to alternative assets by a 10% CAGR from 2022 to 2032. Bain cited that sovereign wealth funds, endowments and insurance funds are seeking higher yields due to public market volatility and declining returns in public equities.
Private markets have come into favor, Bain said in the report, because the “business models that have dominated asset management for years have nearly run their course.” For example, profit margins have compressed, "with the average profit per assets under management dropping by about half — from 15 basis points in 2007 to 8 basis points in 2022," Bain said. In addition, many firms have reduced management fees, causing median revenue to drop by 4% from 2021 to 2022, citing data from Casey Quirk.
In contrast, fewer companies have been going public in recent years, with global initial public offerings plunging by 45% from 2021 to 2023 due to increased regulation and higher costs.
Moreover, traditional asset manager firms’ share of alternative assets jumped to 22% in 2022 from 16% in 2018, Bain noted, as these firms “sought diversification and better risk-adjusted returns.” Some of the firms have made acquisitions to expand their product range, while others have expanded organically, such as Fidelity launching 18 alternatives products in 12 months.
