Private Markets 2024

Private markets will continue to grow in assets, though at a slightly slower pace compared to recent years (13% vs. 19%) due to a slowdown in fundraising from peak levels. Growth rates are expected to exceed those of other asset classes, resulting in private markets accounting for 16% of global investment assets, up from the current 12%.

This document presents Arcano Capital’s management teams’ outlook on Private Markets for 2024. The year 2023 began with uncertainties about growth and recession risks, with the primary challenge for private markets being to assess the impact of one of the most intense interest rate hike cycles in recent history. As positive inflation data and economic resilience were confirmed, both private and public markets benefited from a widespread sense of optimism.

In 2024, we anticipate continued improvements in inflation rates, albeit alongside slower economic growth. Acknowledging that every year brings its uncertainties, we believe that 2022 and 2023 have validated the role private markets play in a diversified investment portfolio. The debate over private valuations at the end of 2022 was overshadowed by the recovery of public markets in 2023. Diversification benefits, return comparisons, and volatility adjusted for greater private illiquidity all support future growth in private markets.

Private Equity

In 2023, Private Equity experienced a significant slowdown in fundraising due to the “denominator effect” caused by declines in public markets in 2022, along with reduced distributions as company sales slowed. Prospects are positive as these factors are expected to normalize in 2024, with the retail and family office segments anticipated to continue increasing their exposure to this asset class. In 2023, demand for Secondary funds benefited from improved pricing due to limited liquidity and valuation adjustments, presenting an attractive entry point for 2024.

Infrastructure

Infrastructure strategies also experienced a significant slowdown in asset inflows during 2023, primarily due to the sector’s success in recent years, but also due to competition from fixed income in a higher interest rate environment. In 2024, we expect investor exposure to the sector to increase as they seek to enhance portfolio diversification, low-risk investments, consistent and uncorrelated returns, protection against economic downturns, and a hedge against more persistent-than-expected inflation. The growth of this asset class is supported by strong public-private backing, primarily related to the energy transition and digitalization.