Private markets set to grow into a $65T opportunity, says Bain

Private market AUM is set to more than double the growth rate of public assets, creating a rich opportunity for asset managers and wealth firms alike, according to a recent analysis by Bain & Company.

The report projects private assets will expand at a compound annual growth rate (CAGR) of 9 to 10 percent to reach $65 trillion by 2032, eventually comprising 30 percent of all AUM.

Bain’s report, “Avoiding Wipeout: How to Ride the Wave of Private Markets,” chalks that growth up to a shift in wealth and asset management strategies as returns from public markets dim significantly.

“Wealth and asset managers are now favoring private markets because the business models that have dominated asset management for years have nearly run their course,” Markus Habbel, global head of Bain’s wealth and asset management practice, said in a statement.

The report highlights a growing appetite for alternative assets that’s primarily driven by institutional investors – including sovereign wealth funds, endowments, and insurance companies – seeking more stable yields amidst public market volatility.

Bain’s research anticipates a 10 percent CAGR in institutional allocations to alternative assets from 2022 to 2032, driving AUM to at least $60 trillion. Retail investor participation is also expected to rise, with their share of AUM expected to climb from 16 percent in 2022 to 22 percent in 2032.

“Individuals are drawn to the alternative asset market by the prospect of diversification and higher returns and are therefore willing to tolerate lower liquidity,” Habbel noted.

In an effort to meet retail investors in the middle of the liquidity spectrum, asset managers have developed products like intermittent liquidity offerings and interval funds specifically for retail clients in the past few years.

The trend hasn’t escaped the notice of big names like BlackRock, Apollo, and Goldman Sachs, all of which have been building up their private-market ETF capabilities in a land grab for retail dollars in the space.

Bain’s analysis also highlights the blurring of lines between traditional and alternative asset management, with firms increasingly positioning themselves as full-service providers across various asset classes. Those that succeed will likely focus on offering specialized products for high-net-worth clients and achieving scalability in their operations, Bain said.

“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,” Habbel added.