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Investors to commit $17 trillion in alternative assets by 2025

posted onDecember 22, 2020
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Worldwide alternatives assets under management (AUM) will grow from $10.74tn as of December 2020, to $17.16tn by the end of 2025, according to the latest research by Preqin, the London-based alternatives research and data provider.

Private equity and private debt will be the biggest drivers of growth, respectively increasing their assets by 16% and 11% annually, and private equity will come to account for around half of the total alternatives industry. Other asset classes are predicted to see slower growth, but all are set to expand in size over the next five years. Regionally, Asia-Pacific is emerging as the biggest growth market: with AUM focused on the region increasing by a CAGR of 25%, total assets are set to hit almost $5tn by the end of 2025.

“Asia will be fertile ground over the next five years for alternatives investors as the region’s economies transition toward domestic demand and companies look to service the ever-expanding middle classes. We expect alternatives AUM in the region to grow at a world-beating 25.2% CAGR through to 2025” the report titled “The future of Alternatives 2025” read.

alternative assets

(ASIA-PACIFIC Alternative AUM $bn & Forecast 2019-2025 Source: Preqin)

David Lowery, Head of Research Insights at Preqin commented:

“Private markets are a core part of the investment landscape, and have seen an incredible rate of growth in size and influence in recent years. The fundamentals are strong: alternatives funds keep offering investors strong, uncorrelated long-term returns, even through the sustained low-interest rate environment and volatile market cycles of recent years. Investors in turn have been committing more and more capital to alternatives, and this is unlikely to slow in the coming years. In fact, our model shows that growth will continue, buoyed by an uptick in private equity activity and booming participation in Asia-Pacific. It’s a very exciting time to be a part of the industry.”

Key Alternative Assets AUM Forecast Facts:

• Global alternatives AUM will grow from $10.74tn as of December 2020, to $17.16tn by the end of 2025.
• Private equity AUM will increase from $4.41tn in 2020 to $9.11tn in 2025. With a CAGR of 15.6%, it will be the
fastest-growing asset class over the next five years.
• Already the largest asset class, private equity will come to dominate the wider industry. By the end of 2025, the
asset class will account for 53% of all alternatives AUM.
• Private debt is set to grow at 11.4% annually, going from $848bn at the end of 2020 to $1.46tn at the end of
2025.
• Real estate and hedge funds are set to see much slower growth. Real estate assets will grow from $1.05tn to
$1.24tn between 2020 and 2025, while hedge funds will increase from $3.58tn to $4.28tn in the same period.
• Asia-Pacific will be a key driver of global growth as participation in alternatives expands. AUM in the region is
set to increase from $1.62tn to $4.97tn over the next five years.
• That said, North America will still hold half of total global alternatives AUM; by 2025 the region will have $8.6tn in assets

To launch its Future of Alternatives 2025 series, Preqin has produced projections of AUM growth in each asset class, and for the industry as a whole. This model combines Preqin’s data covering 20 years’ of alternatives activity with macroeconomic trends to offer a detailed picture of the course of the industry’s development over the next
five years.

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