Retail investors are set to drive growth in private investment strategies, with global assets expected to double by 2027, a new report says.
Data provider Preqin forecasts global private assets under management will grow from US$9.3 trillion at the end of 2021 to US$18.3 trillion by the end of 2027.
With many institutional investors nearing their target allocations for alternative assets, retail investors will be a key driver of that growth as more products become available in that channel, Preqin said in a report released Wednesday. Interest among high-net-worth investors, in particular, is expected to increase.
Between 2015 and 2021, the compound annual growth rate of private assets was 14.9%. Preqin expects that to slow to 11.9% from 2021 to 2027, but with demand persisting as investors seek alternative options in an uncertain market.
“Against this backdrop, we expect to see more sustained growth in the asset classes which have historically performed well in more volatile markets and which are able to provide inflation protection, such as infrastructure, natural resources and private debt,” Preqin CEO Christoph Knaack said in a release.
The report said venture capital is expected to be the fastest-growing asset class in the next few years, growing at 19.1% per year. Infrastructure is next with expected asset growth of 13.3%, followed by private debt (10.8%).
“This is largely due to the prevalence of floating rate exposure in direct lending compared to traditional fixed-income products, building in some resiliency and inflation protection for investors,” the report said of private debt investments.
Growth in private equity and real estate is expected to slow, however, as higher interest rates raise the cost of debt and weaken valuations.
In Canada, asset managers have been acquiring private investment firms to try to stand out in a competitive market for high-net-worth clients and to fight back against diminishing fund fees.