Key Takeaways
- • Bain & Company projects private market assets under management will reach $60 to $65 trillion by 2032, growing at a 9% to 10% compound annual growth rate, more than twice the pace of public assets.
- • Private assets are expected to account for 30% of all AUM by 2032, according to Bain's research "Avoiding Wipeout: How to Ride the Wave of Private Markets."
- • Fee revenue from private market investments is forecast to double to $2 trillion by 2032, with private equity and venture capital remaining the largest asset categories.
- • The retail share of alternative AUM is projected to rise from 16% in 2022 to 22% in 2032, driving demand for intermittent liquidity products.
- • Bain identifies five priorities for asset managers: defining where to play, building front-to-back-office capabilities, educating investors, adapting sales and marketing, and improving M&A integration.
Summary
Private market assets under management will grow more than twice as fast as public assets, reaching $60 to $65 trillion by 2032, according to new research from Bain & Company released on August 21, 2024. Bain's analysis, titled "Avoiding Wipeout: How to Ride the Wave of Private Markets," projects a 9% to 10% compound annual growth rate for private assets through 2032, when they would account for 30% of all AUM.
The growth is occurring as wealth and asset management firms expand their private market offerings while profitability from public markets has fallen by half. Markus Habbel, global head of Bain's Wealth & Asset Management practice, said the business models that have dominated asset management for years "have nearly run their course." He noted that private assets constitute a much larger market than public assets and offer potentially higher yields, diversification, and, in cases such as real estate, a hedge against inflation.
Bain expects fee revenue from private market investments to double to $2 trillion by 2032, with private equity and venture capital remaining the largest asset categories. Private alternative credit is expected to expand at a 10% to 12% CAGR, while infrastructure is projected to maintain a 13% to 15% CAGR over the next decade.
Institutional investors are expected to increase their alternative asset allocations at a 10% CAGR from 2022 to 2032, with sovereign wealth funds, endowments, and insurance funds seeking higher yields amid public market volatility and declining returns. Retail participation is also rising, with the retail share of AUM expected to climb from 16% in 2022 to 22% in 2032. Habbel said individuals are drawn to alternatives by diversification and higher returns and are willing to tolerate lower liquidity, and that leading firms have launched products such as intermittent liquidity offerings for retail investors.
Bain says asset managers are converging on full-service models across traditional and alternative products. Dominant providers will likely pursue niche products that attract high-net-worth individuals and build large-scale production. Bain recommends five priorities: defining where to play and how to win; developing new front-to-back-office capabilities, including redesigned operations; educating investors on liquidity and the ability to collateralize private assets; adapting sales and marketing through digital platforms and specialized sales representatives; and improving M&A integration skills, given that private markets have recorded more than 40 transactions in each of the past three years.
The growth is occurring as wealth and asset management firms expand their private market offerings while profitability from public markets has fallen by half. Markus Habbel, global head of Bain's Wealth & Asset Management practice, said the business models that have dominated asset management for years "have nearly run their course." He noted that private assets constitute a much larger market than public assets and offer potentially higher yields, diversification, and, in cases such as real estate, a hedge against inflation.
Bain expects fee revenue from private market investments to double to $2 trillion by 2032, with private equity and venture capital remaining the largest asset categories. Private alternative credit is expected to expand at a 10% to 12% CAGR, while infrastructure is projected to maintain a 13% to 15% CAGR over the next decade.
Institutional investors are expected to increase their alternative asset allocations at a 10% CAGR from 2022 to 2032, with sovereign wealth funds, endowments, and insurance funds seeking higher yields amid public market volatility and declining returns. Retail participation is also rising, with the retail share of AUM expected to climb from 16% in 2022 to 22% in 2032. Habbel said individuals are drawn to alternatives by diversification and higher returns and are willing to tolerate lower liquidity, and that leading firms have launched products such as intermittent liquidity offerings for retail investors.
Bain says asset managers are converging on full-service models across traditional and alternative products. Dominant providers will likely pursue niche products that attract high-net-worth individuals and build large-scale production. Bain recommends five priorities: defining where to play and how to win; developing new front-to-back-office capabilities, including redesigned operations; educating investors on liquidity and the ability to collateralize private assets; adapting sales and marketing through digital platforms and specialized sales representatives; and improving M&A integration skills, given that private markets have recorded more than 40 transactions in each of the past three years.
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