Sector Estimates Point to Private Markets Growing From the Current $13 Trillion to Over $20 Trillion by 2030. But Before Then, Investors Must Face a Uncertain Second Half of 2025.
On this shorter-term outlook, leading investment firms have expressed their views in their mid-year outlooks, which agree that alternative assets will continue to make sense in investor portfolios.
For example, in the view of Goldman Sachs AM, private markets, hedge funds, and strategies for hedging against extreme risks can offer alternative paths to resilience, while also providing exposure to themes of persistent and accelerated growth. “In private markets, we continue to expect strong investor demand for private credit, driven by its historically attractive risk-adjusted returns and diversification benefits,” they note.
They also add that for investors needing liquidity or looking to rebalance their portfolios, ongoing innovations in secondary markets are offering new options. “We also believe the current environment will continue to favor alpha generation by hedge funds, while reinforcing the diversification value that these investments have historically provided,” they state.
From M&G’s perspective, they believe the recent recovery in private markets is unlikely to be derailed by recent events, since “the structural growth drivers remain intact and will continue,” they note. They add: “The outlook for private credit is more positive than before, with spreads and demand likely to improve. Private equity could be affected by higher financing costs and a more complex operating environment for investments. The unlisted nature of private markets is likely shielding investors from the worst of short-term market volatility, while preserving the long-term appeal of this asset class,” they emphasize.
Peter Branner, CIO of Aberdeen Investments, and Paul Diggle, Chief Economist of Aberdeen Investments, consider private markets to be a structural opportunity given their “ideal” position amid a falling interest rate environment, an economy that is slowing but not contracting, and a historical undersupply of quality assets in areas such as real estate, infrastructure, and private credit.
Investment Ideas
When it comes to specific ideas, Goldman Sachs AM points out that flexible financing solutions, such as hybrid capital, can help companies with strong fundamentals optimize their capital structures. “In an unpredictable macroeconomic environment, we see opportunities to invest in themes of persistent and accelerated growth. Increased spending on defense and infrastructure in developed markets reinforces the strength of economic security, despite recent short-term volatility in equity markets. Artificial intelligence, the clean energy transition, and the return of industrial production are driving strong energy and electricity demand. We believe more private credit aimed at climate transition will be necessary to expand energy solutions across different countries and use cases,” the firm explains.
According to the asset managers, private credit has been one of the most attractive alternative assets during the first six months of the year and is expected to remain so in the next six. “In private markets, rising financing costs could pose a challenge for riskier, unconventional companies and/or those with long-term cash flows exposed to uncertainty. However, despite the challenges, opportunities may arise for debt-focused specialist investors, along with greater incentive for companies to seek funding from parties more willing to assess their specific conditions,” notes M&G.
For the firm, this is not the only investment idea for the second half of the year—they also believe that real estate may remain relatively unaffected by uncertainty. “While it’s possible, it seems unlikely that a weaker economic or corporate environment would significantly harm the currently strong demand for occupancy. In fact, the limited supply and consistent evidence of rising rental levels suggest that the current real estate recovery is well-founded,” they explain.
In that sense, the two experts from Aberdeen Investments add: “The global direct real estate market appears attractive, with improving occupancy and credit markets, but with limited supply. Portfolio diversification is important in an unpredictable world. With increasingly frequent signs of positive correlation between equities and fixed income—both rising and falling in unison—standard equity and bond portfolios will not provide sufficient diversification.”
On the other hand, M&G warns that not all areas of the private markets universe would be immune to a drop in market confidence, and for private equity, the situation could become more complicated: “If the world resigns itself to higher tariff levels than today, this could have an inflationary effect, making it harder for central banks to cut interest rates as much or as quickly as expected. This would increase financing costs for private equity. The operating environment for companies would also be affected, possibly lengthening holding periods and making exits more difficult.”
