Growth of Alternative Investments Market
The chart provides a breakdown of global private market assets under management (AUM) as of the first half of 2023, totaling $13.1 trillion. North America holds the largest share of private market AUM across most categories. Europe and Asia follow with significant portions in venture capital and growth investments. This highlights the growing importance of private markets as institutional investors increasingly allocate funds to private assets, aiming for higher returns and greater portfolio diversification.
The image illustrates a growing investment opportunity in private markets, increasing from $4 trillion in 2013 to an estimated $30 trillion by around 2033. The largest portion of this opportunity lies in private equity, followed by private credit, infrastructure, and real estate. This trend suggests a continued shift towards private market investments as a major focus for investors globally.
The chart displays a comparison of various asset classes based on their back-tested annual net return and historical volatility (risk). Private markets (shown in light orange) generally offer higher returns compared to public markets but also come with varying levels of risk.
The chart illustrates the potential impact of adding private markets to a traditional investment portfolio in terms of both returns (vertical axis) and risk (horizontal axis, measured as historical volatility). The traditional portfolio (gray dot) sits lower on the chart with relatively lower returns and risk. By incorporating various proportions of private markets (as indicated by the percentage labels on the orange dots), the portfolio's performance shifts.
The chart shows the changes in institutional investor asset allocations from 2014 to 2023, highlighting shifts in investment preferences over time. Notably, the allocation to private markets, including private equity, real estate, infrastructure, and private credit, has steadily increased. In 2023, private markets accounted for 27% of institutional portfolios, which is 10 percentage points higher than a decade ago. At the same time, the share of stocks and fixed income has decreased.
The chart displays the performance of various private market asset classes, focusing on the internal rate of return (IRR) spreads for funds raised between 2011 and 2020. Private equity (PE) stands out with a median IRR of 16.4%, making it the best-performing asset class over the long term. Real estate funds had a median IRR of 9.8%, with top-quartile funds reaching 15.7%. Private debt also showed good performance, with a median IRR of 9.0% and top-quartile funds returning 12%.
The chart shows the global fundraising for secondaries strategies from 2010 to 2023, highlighting a significant increase in 2023, where total fundraising reached $76 billion, marking a 92% growth compared to the previous year. The fundraising activity in 2023 is the second-highest on record. Over the last four years, secondaries funds have raised more than $255 billion, almost double the amount raised in the previous four-year period.
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