PE will be the fastest-growing asset class over the next five years

Global data

Private equity assets under management will increase from USD 4.41 trillion in 2020 to USD9.11 trillion in 2025 – and with a CAGR of 15.6 per cent, it will be the fastest-growing asset class over the next five years, according to Preqin.

At the end of 2020, alternative assets firms will hold USD10.74 trillion in assets under management overall, according to the first part of Preqin’s Future of Alternatives 2025 report.

Already the largest asset class in the alternatives sector, private equity will dominate the wider industry. By the end of 2025, the asset class will come to account for 53 percent of all alternatives AUM, the research showed. 

“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,” said David Lowery, head of Research Insights.

Private equity and private debt will be the biggest drivers of growth, growing their assets by 16 per cent and 11 per cent annually.

“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,” added Lowery.

He continued: “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.”

Asia-Pacific is emerging as the biggest growth market, as AUM is set to increase from USD1.62 trillion to USD4.97 trillion in the next five years. North America will still hold half of total global alternatives AUM however; by 2025 the region will have USD8.6 trillion in assets.