The global alternatives industry’s assets under management are projected to reach $29.2 trillion by the end of 2029, according to the 2024 Global Alternatives Fund Survey issued by professional services firm Ernst & Young on Dec. 11.
Global AUM for alternative investments, which are defined as including private equity, private credit, real estate, real assets and infrastructure, commodities, hedge funds and digital assets, had climbed to $17.6 trillion at the midpoint of 2024 from $13.3 trillion at the end of 2021.
At the end of 2029, private equity assets are expected to reach $12 trillion (up from $5.8 trillion as of the end of 2023), making it the largest component of the global alternatives market. The second-largest element, hedge funds, will jump to $5.7 trillion at the end of 2029 from $4.5 trillion at the end of 2023.
This growth in alternative assets will likely be fueled by the “accelerated democratization of private markets, enhanced access for individual investors and growing demand for portfolio diversification from institutional investors,” EY said in the report.
On average, institutional investors’ current allocations to alternative investments are most concentrated most heavily in private equity (22%), followed by real estate (16%), credit/private credit (14%), and real assets and infrastructure (12%).
But over the next three years, 50% of investors surveyed plan to increase their exposure to infrastructure, with only 8% planning to reduce their allocations to this asset class. That suggests that this asset class could exceed the popularity of private credit within the next three years, EY said in the report, reflecting strong global demand for the private financing of critical infrastructure.
Private credit is another widely favored asset class, and investors also plan to increase their average allocations to secondaries and equity hedge funds, the survey found. The outlook for most other asset classes is “cautiously positive.” However, on average, institutional investors plan to decrease their allocations to real estate and venture capital over the next three years.
Some 32% of alternative fund managers around the world view wealthy investors as a major new source for growth and see accessing this capital as the greatest priority for the next three years. This goal is especially important to firms based in North America.
The survey also found that investor bases are shifting. While the surveyed firms’ current investor profiles skew heavily toward institutions, high-net-worth and ultra-high-net-worth clients now make up about 20% and 19% of investors, respectively, on average.
The survey was conducted between August and October, and included 224 alternative fund managers and 200 institutional investors across North America, Europe and Asia-Pacific.
Of the 224 fund managers, 58 had more than $10 billion in assets under management, 44 had between $2 billion and $10 billion; and 122 had less than $2 billion.
Of the 200 investors, 119 had more than $10 billion in assets, 35 had between $2 and $10 billion, and 46 had less than $2 billion.
