Private Capital AUM is set to Double to Over $18 trillion by 2027

2 minutes
November 3, 2022

In our July outlook for the second half of 2022, we stated that although it appeared that the Private Equity market might be slowing down, we believed this was temporary, due to the current geopolitical and economic situation.

Preqin’s recent research publication, Future of Alternatives 2027 report seems to support our belief.

Prequin estimates that Private Equity Assets Under Management (AUM) are expected to double to 18.3 trillion over the next five years. 

The forecasted growth translates into a double-digit compound annual rate between 2021 and 2027 of 11.9 %, (14.9 % recorded between 2015 and 2021).  

A key driver of this growth, investor demand,  continues to remain strong with deal-making happening across sectors. Though the economy may be slowing down and global relations causing concern, the investment capital is still out-there ready for deployment. Investors are also actively looking for alternative sources (assets) that can provide a steady return, especially in this period of uncertainty. Interestingly if we add hedge funds to the AUM forecast of alternative assets, the combined AUM is expected to reach USD 23 trillion by the end of 2027 ($13.7 trillion reached at the end of 2021), representing an over 70 % increase. 

Power shift to retail investors

To date, institutional investors have used Private Capital as a core part of their investment portfolios, and this trend is accelerating. In our view, the future super-growth for private markets will come from accessing and connecting with the retail investors.

Investment data tells us that High Net Worth Individuals (HNWIs) have been slower than Institutions in the private markets segment, with the majority of their funds still allocated to traditional investments. One of the barriers limiting the investments of HNWIs has been the shortage of investable tailor-made products matching their investment preferences. Leading asset and wealth managers, having reaslised this are actively developing innovative specialist products to further tap into this market.

With this new focus, even smaller retail investor groups are noticing a renewed and sustained interest in private investments marketed to the HNWIs. We expect that this growing HNWIs segment and calculated pivot towards retail investors, will be key drivers of growth in private market investments.

Impact investing and ESG are another growing trend, read our article to learn more about it.

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