(HedgeCo.Net) Despite some headwinds, the private markets sector remains a focal point for capital and strategic planning. According to the latest annual survey by McKinsey, the global private markets industry is “braced for shifting weather” but remains resilient and evolving. McKinsey & Company
Key findings & nuances
- Fundraising across many asset-classes in 2024 fell to its lowest level since 2016. Traditional closed-end commingled funds, for example, saw year-on-year declines. McKinsey & Company
- Yet, despite the fundraising slump, capital deployment increased across many asset classes, and distributions to investors improved (for the first time since 2015 in the case of private equity). McKinsey & Company
- Notably, the structure of private markets is evolving: co-investments, separately managed accounts, open-end vehicles, and retail access are increasing. McKinsey & Company
Trends gaining traction
- Private credit as a preferred alternative: With higher interest rates and banks retrenching from certain lending sectors, private credit is attracting more attention. Invesco
- Infrastructure & real assets: Given inflation concerns and demand for essential-service assets, infrastructure is seen as a resilient anchor in portfolios. yieldstreet.com
- Secondaries & GP-stakes: Liquidity in private markets is improving through secondary markets (investing in existing fund stakes) and through LPs investing in private-equity firms themselves (GP stakes). McKinsey & Company
Implications for investors
- The “illiquidity premium” remains attractive: investors willing to accept longer-term commitments may access higher potential returns. As one earlier analysis noted, the alternatives industry may grow to over USD 24 trillion by 2028 (from ~USD 15 trillion in 2022) partly because of this. KKR
- But the environment is not risk-free: higher financing costs, elevated entry valuations in some sectors, and macro & geopolitical uncertainty all pose headwinds. McKinsey & Company
- Due diligence matters more than ever: as “manager dispersion” increases (i.e., differences in performance across fund managers), choosing the right partners, structures and alignment of interests is key. CAIA
Bottom line
While fundraising for private markets may face challenges, the broader momentum remains strong. For savvy investors, private markets continue to offer meaningful opportunity—especially when deployed with care, realistic expectations, and an eye on liquidity and structure.