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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. 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. 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.

Private debt is also becoming more global. While North America represents more than 60% of total private debt AUM, 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 2030, 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%. 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.

Press release

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