Amidst a period of sustained market volatility and high inflation, private markets have experienced significant transformation. Throughout the last few years, segments from private equity to real estate have grappled with challenges such as interest rate hikes, high borrowing costs, and increased regulatory scrutiny. However, the long-term drivers of growth remain intact, and many firms have adopted emerging trends and technologies to become even more adaptable and resilient.

By late Q2 2024, capital markets have shown great recovery with inflation stabilizing. Barring any new macroeconomic shocks, rates are likely to moderate in the coming year. Investors are increasingly attracted to private markets, and overall, the industry’s prospects look brighter. As always, some asset classes are expected to perform better than others as the year progresses.

• Private equity (PE) sees growth prospects despite a slowdown in buyouts.
  Macroeconomic factors and financing constraints led to a 27% decrease in PE buyouts from 2021 to 2023. Yet, in the first four months of 2024, the total value of deal-making has increased year-over-year. While this growth is attributed to an increase in deal size rather than deal activity, there is optimism for a rebound. Pandemic-era buyouts are approaching their exit timeframe, and dry powder has once again spiked, putting pressure on general partners (GPs) to increase deal activity.
  
  

• Private credit growth plays a transformative role in the industry.
  In the past decade, private credit funds have emerged as key players in the credit markets—providing capital to support leveraged buyouts, recapitalizations, and offering more flexible and customized financing solutions. Private credit is increasingly filling the lending gap left by risk-averse banks. With $450 billion in dry powder as of December 2023, it’s in a strong position to support increased deal-making activity in 2024.
  
  

• Secondaries market momentum continues with 92% YoY growth and strong fundraising.
  The secondaries market has successfully navigated market headwinds, witnessing a 92% YoY increase in 2023. With funds raised exceeding $255 billion over the last four years, the momentum behind secondaries transactions is expected to continue into 2024.
  
  
• ESG and AI transform the way firms invest.       
  Sustainable investing is becoming a significant part of PE investment strategies. According to a Dechert LLP survey, 94% of PE firms globally have incorporated sustainable investing capabilities into their investment processes. Similarly, technology is playing an increasingly critical role across the value chain. PE firms seeking to differentiate themselves in a competitive environment are using AI to accelerate and enhance deal sourcing, due diligence, and portfolio management.
  
  
• Geographic diversification remains important as investors anticipate growth in APAC.  
  In APAC, lenders with significant and flexible capital reserves enjoy greater negotiating power compared to their counterparts in the crowded private credit markets of the United States and Europe. The region, especially India, South Korea, Japan, and Southeast Asia, is anticipated to experience the highest growth. Private credit is strategically positioned to capture the dynamic business environment in these areas.