- New frontiers in private credit, emerging AI-driven
opportunities, more M&A and IPO activity, and tailwinds for
real estate are set to define private markets in 2025
- Industry estimates project private markets will grow from $13
trillion today to more than $20 trillion by 20301
BlackRock Inc. (NYSE:BLK) today released its annual Private
Markets Outlook mapping out how the sector, spanning geographies
and asset classes, will evolve in the year ahead. Covering trends
in private debt, infrastructure, private equity and real estate,
the report helps clients navigate this rapidly growing space.
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Fundamentals across private markets remain resilient, setting
the stage for a new phase of growth in 2025, marked by elevated
investment activity, a rise in exits, lower financing costs and
more demand for long-term capital. Industry estimates project
private markets will grow from $13 trillion today to more than $20
trillion by 2030.2 All client segments, especially retail wealth,
are expected to increase their allocations to private markets as
they seek long-dated, profitable assets to match long-dated
liabilities. This new wave of investment into the real economy
should help transform markets and economies. One major growth area
is AI, which presents a range of opportunities across all private
asset classes.
“Investors everywhere are keen on private markets,” said Mark
Wiedman, Head of BlackRock’s Global Client Business. “Today,
the sector accounts for $13 trillion but we expect it to grow to
more than $20 trillion by the end of the decade, driven by rising
allocations across pensions, insurance, wealth, and sovereign
investors. Credit and infrastructure will lead the way with the
fastest growth. And everywhere investors will demand transparent,
holistic information about their private exposures in the context
of their whole portfolio.”
Private Debt: Double Down on Growth
Private debt continues to cement its status as a sizable and
scalable asset class for a wide range of long-term investors. But
there is plenty of room for growth. At $1.6 trillion in global AUM,
the asset class accounts for 10% of the $16.4 trillion alternative
investment universe.3
Private debt is taking on more deals as banks become
increasingly selective, and the public debt markets focus on deals
that are often too large for middle-market businesses. More
companies have come to value the certainty of execution and
flexibility that private debt provides. At the same time, investors
increasingly look to private credit as a portfolio diversifier.
There is plenty of room to grow as the asset class continues to
expand its role. One of the newest frontiers is asset-backed
finance, where private lenders only hold a roughly 5% market share,
of a $5.5 trillion addressable market in the U.S. alone, according
to Oliver Wyman.4
Private debt is also becoming more global. While North America
represents more than 60% of total private debt AUM,5 Europe and
Asia-Pacific have been growing. Today, these regions are more
reliant upon bank financing, suggesting a significant opportunity
for private debt to expand, similar to the funding diversification
that has taken place in the U.S.
One of the main themes we see persisting into 2025 is
dispersion, but not widespread market disruption. While the private
debt market has proven itself resilient, dispersion will likely
remain the case across private debt, highlighting the importance of
granular credit selection and structural protections.
Infrastructure and AI: Unlocking Opportunities
Artificial Intelligence (AI) is driving a transformative shift
in global economies and industries are increasingly reliant on
private capital to unlock AI’s full potential. Private assets offer
opportunities to invest across the entire AI value chain –
including data centers and data infrastructure.
While capex for AI data centers is expected to exceed $1.5
trillion by 20306, power is also a key component of the AI
buildout, driving fresh investment in power generation and
transmission infrastructure. In response, more data-center
operators are forming partnerships with power producers and
exploring "behind-the-meter" solutions, generating their own
off-grid power through solar, wind, natural gas, and even nuclear
energy.
Given the massive investment required to meet growing AI data
center demand and the complexity of integrating power and data
center development capabilities, we believe this represents a
significant opportunity for experienced infrastructure
investors.
Private Equity: A Turning Tide
The tide is turning for private equity. In 2024, deal activity
jumped 21% and exceeded pre-pandemic averages by 45%.7 In addition,
a more active exit market, coupled with an increased focus from GPs
on returning capital, is offering relief to investors seeking
distributions. Last year saw a turning point with distributions
overtaking capital calls for the first time in eight years.
Valuations in private equity continue to track below public
markets, offering attractive entry points. Among sectors, we
continue to see opportunities across healthcare, specifically
take-private deals and corporate carveouts, and we believe AI will
fuel LBO activity among incumbent businesses with data that can be
tapped with large language models.
We see significant opportunity in private equity overall,
particularly within the middle market, as both M&A activity and
IPOs increase, driving more exits and distributions, and leading,
in turn, to new investments.
Real Estate: A New Cycle
After a challenging two-year downturn, we believe the real
estate sector is now poised to benefit from a number of economic
tailwinds, with both cyclical and structural trends at play in the
sector. We’ve seen sentiment improve, with an uptick in bidding
interest. The new cycle will likely look very different compared to
the period following the global financial crisis, with a relatively
higher cost of capital and further dispersion between winners and
losers.
In a world of higher volatility, we see real estate
opportunities aligned with long-term structural trends around aging
demographics in developed countries, properties that can facilitate
e-commerce and new trade partners, as well as a heightened demand
among tenants for energy-efficient buildings.
The Asia-Pacific region, in particular, offers a compelling
cyclical and structural opportunity, where investors can tap into
strong regional growth, differentiated markets with uncorrelated
performance, and growth sectors still in the early stages of their
evolution.
To download BlackRock’s 2025 Private Markets Outlook, please
click here.
Forward Looking Statements
Certain information contained in this presentation constitutes
“forward-looking statements,” which can be identified by the use of
forward looking terminology such as “may,” “will,” “should,”
“expect,” “anticipate,” “project,” “estimate,” “intend,”
“continue,” “target,” “believe,” the negatives thereof, other
variations thereon or comparable terminology. Due to various risks
and uncertainties inherent in the capital markets or otherwise
facing the asset management industry, actual events or results or
the actual performance of the Fund may differ materially from those
reflected or contemplated in such forward-looking statements.
About BlackRock
BlackRock’s purpose is to help more and more people experience
financial well-being. As a fiduciary to investors and a leading
provider of financial technology, we help millions of people build
savings that serve them throughout their lives by making investing
easier and more affordable. For additional information on
BlackRock, please visit www.blackrock.com/corporate.
______________________________
1 2025 Private Markets Outlook, p. 3; Source: Preqin, September
18, 2024. Note: There is no guarantee that any forecasts will come
to pass. 2 Ibid. 3 2025 Private Markets Outlook, p. 14; Source:
Preqin, September 2024. Note: There is no guarantee that any
forecasts will come to pass. 4 Ibid.; Source: “Private Credit's
Next Act,” April 2024, Oliver Wyman. Note: The Oliver Wyman
analysis and estimates were aggregated from a range of sources
including, but not limited to: Federal Reserve Board (Z1 tables,
G19, G20 and H8); Federal Reserve Bank of New York; Federal Reserve
Bank of Dallas; Bureau of Transportation Statistics (BTS);
Dealogic; Conning, Inc., Conning Esoteric ABS Strategy Fact Sheet —
used with permission; Finsight.com; Structured Finance Association;
Boeing (Commercial Aircraft Finance Market Outlook); Secured
Finance Network; Equipment Leasing and Finance Association; Morgan
Stanley Research; CACIB Research; company reports and disclosures.
5 Ibid.; Preqin, November 2024. 6 2025 Private Markets Outlook, p.
11. Source: McKinsey Data Center Demand Models, RBC BlackRock
Investment Institute, BNEF, Grid Strategies, Goldman Sachs
Research. Note: There can be no assurances that any forecasts or
estimates will materialize. 7 2025 Private Markets Outlook, p. 18;
Pitchbook Q3 2024 Global PE First Look. Note: Changes quoted are
based on YTD 9/30/24 figures annualised.
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Media Christa Zipf
christa.zipf@blackrock.com +1-646-231-0013
+1-347-814-3447
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