Global alternatives assets under management are set to hit $29.2 trillion by the end of 2029, almost doubling in just six years, according to Preqin.
The data provider — which BlackRock agreed to acquire earlier this year — added that alternatives AUM is on track to surpass the $30 trillion by 2030, up from $16.8 trillion at the end of 2023.
The "Future of Alternatives 2029" report forecasts an annualized growth rate of 9.7% for the period from the end of 2023 to 2029. While a positive rate, that represents a slowdown from 10.5% for the period 2017 to 2023.
Secondaries is set to reach an annualized growth rate of 13.1% over the period, driven by private wealth and weak exit markets. The secondaries market is currently a “buyer’s market,” Preqin said, with investors’ portfolios facing liquidity constraints. The data provider expects ongoing demand for secondaries strategies from the private wealth channel, it said.
The private equity market is set to more than double, remaining the largest private capital asset class, reaching $12 trillion by 2029, up from $5.8 trillion in AUM at the end of 2023. The annualized growth rate is expected to be 12.8%, Preqin said, while the asset class is set to represent about 6% of public and private equity markets by the end of this year.
Private equity performance, however, is expected to be softer than in the past, with global private equity’s internal rate of return expected to be 13.4% for the period, down from 15.5% for the 2017 to 2023 period.
Early stage venture capital AUM growth is expected to be an annualized 13.2% thanks to artificial intelligence, followed by general venture capital at 11.1%. Late-stage venture capital's annualized AUM growth is forecast at 8.1%, weighed down by a challenging exit environment and asset valuations, along with greater regulatory scrutiny of mergers and acquisitions, Preqin said.
Private debt, however, is expected to improve, with distressed debt leading the positive growth. The average IRR should rise to 12% for the period to 2029, with distressed debt expected to average 13.4%. For the 2017 to 2023 period, the average IRR was 8.1%. Private debt AUM is forecast to grow to $2.6 trillion by 2029, from $1.5 trillion at the end of 2023.
Elsewhere, global private real estate AUM is expected to continue to grow, to $2.7 trillion by 2029 from $1.6 trillion in 2023. Value-added strategies are expected to see an IRR increase of 9.6%, leading the way for the asset class.
Global private infrastructure AUM is forecast to reach $2.4 trillion in 2029, with the energy transition lifting fundraising and deals starting in 2027; and hedge fund AUM is set to surpass $5.7 trillion by 2029, although outflows are predicted to impact performance-based growth. The asset class has the slowest forecast annualized growth rate over the 2023 to 2029 period, at 4%.
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, in a news release accompanying the report. “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.”
