Private equity and hedge funds assets are expected to reach $14 trillion under management by the year 2023, according to a new report by Preqin.
The report, which is available on Preqin's website, states the investment industry had $8.8 trillion in AUM as of Dec. 31, with that figure expected to grow 59% over the next five years.
Private equity funds are projected to grow 58%, rising to $4.9 trillion, overtaking hedge funds to become the largest alternative asset class. Hedge funds, meanwhile, are expected to grow by 31% to $4.7 trillion.
Private debt and real assets funds are predicted to double their AUM in the same period.
Acknowledging that "$14 trillion may sound like an overly ambitious prediction," Mark O'Hare, CEO of Preqin, said in a news release announcing the report that "it is lower than the average growth rate we've seen in the past decade. There are several key factors that will drive this growth, including the proven long-term performance of alternatives; the growing opportunities available in private debt; and the rise of emerging markets in which alternatives funds are already entrenched."
"If anything, we believe that $14 trillion is more likely to be too low than it is to be too high," he said.
Preqin interviewed 420 fund managers and investors. Industry participants were asked what their predictions were for AUM in each alternative asset class in 2023, based on AUM totals in 2008 and 2017. Preqin then calculated an average of their responses to produce its predictions.