Global alternatives market AuM to reach $24.5trn by 2028

Written by Adam Cadle

17/10/2023

Global alternatives AuM are expected to reach $24.5trn by the end of 2028, compared to an estimated $16.3trn at the end of 2023, according to Preqin’s Future of Alternatives 2028 report.

This represents a forecast annualised growth rate of 8% over the forecast period of 2022 to 2028.

Global private debt AuM are expected to grow at a compound annual growth rate (CAGR) of 11% from 2022 to 2028, to reach an all-time high of $2.8trn – almost doubling the 2022 figure of $1.5trn. Private debt performance is expected to be stronger than in the past, thanks in part to a positive outlook for distressed debt strategies. For 2016 to 2022, its internal rate of return (IRR) was 9.11%, a figure forecast to rise to an average 9.81%, from 2022 to 2028.

Private debt AuM targeting North America is expected to increase substantially, from $1trn in 2023 to $1.7trn by the end of 2028. Furthermore, AuM targeting Europe is forecast to grow at 14% over the same period to $0.9trn by 2028, showing the market demand for funding amid more challenging financial market conditions.

The forecast for total global private equity AuM is to reach $8.5trn by the end of 2028, from $4.8trn in 2022. This represents a 10% compound growth rate, from 2022 to 2028. At the same time, performance is expected to slow to 12.6% over the forecast period compared to 16% during the 2016 to 2022 period.

Against the backdrop of a slow infrastructure fundraising market in the first half of 2023, Preqin has forecast global infrastructure AuM will reach $1.7trn by the end of 2028.

Global private real estate AuM is forecast to reach $2.2trn by the end of 2028, from $1.6trn in 2022, an annualised growth rate of 6% over the period. This rate is lower than the double-digit annualised growth between 2016 to 2022, as real estate investments are expected to be hampered by concerns over heightened interest rate, uncertain office demand, and lingering spreads in asset pricing.

Global hedge funds AuM are expected to increase to $5.2trn by 2028, from $4.2trn in 2022. This represents a relatively modest 3.6% annualised growth rate over the forecast period.

Cameron Joyce, SVP, head of private equity, at Preqin said: “Geopolitical risks and rising long-term bond yields are two of the factors behind more moderate fundraising activity and performance expectations. In spite of these challenges, the industry is expected to show solid growth until 2028, thanks to a gradual recovery in fundraising activity. Softer investor sentiment is creating opportunities in direct lending, secondaries and real assets in particular. The longer-term fundamentals behind the growth of the private markets remain broadly intact, while the market continues to evolve rapidly.”

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