As asset managers adapt to rising investor demand for alternative assets, Bain & Company predicts that private market investments will see substantial growth, with assets expected to hit $65trn by 2032.

Private market assets under management are expected to grow at more than twice the rate of public assets, reaching between $60trn and $65trn by 2032, according to global management consulting firm Bain & Company. In a report, Bain highlighted a significant shift in the asset management industry, driven by the growing appeal of private markets as profitability in public markets declines.

Growth projections

Bain & Company’s analysis revealed that private assets are expected to grow at a compound annual growth rate of 9% to 10% over the next decade, significantly outpacing the growth anticipated in public assets. By 2032, private market assets are anticipated to account for 30% of all AUM. The study concluded that this shift reflects a broader trend among wealth and asset management firms, which are increasingly focusing on private market offerings as returns from public markets diminish.

Markus Habbel, global head of Bain’s wealth and asset management practice, , stated in the report that traditional business models in asset management are nearing their limits. He argued that private assets represent a much larger market than public assets and offer potentially higher yields, greater diversification and in cases such as real estate, a hedge against inflation.

Revenue growth

Fee revenue from private market investments is forecasted to double, reaching $2trn by 2032. Bain’s report identified private equity and venture capital as the largest asset categories within private markets. Additionally, significant growth is expected in private alternative credit, which is projected to expand at a CAGR of 10% to 12%, and infrastructure investments, which are likely to grow at a rate of 13% to 15% annually over the next decade.

Investors’ demand

According to Bain, investor demand for alternative assets is also on the rise. The consultancy firm estimated that institutional investors will increase their allocation to alternative assets by a 10% CAGR from 2022 to 2032, driving AUM to at least $60trn. Sovereign wealth funds, endowments and insurance funds are particularly drawn to private markets as they seek higher yields in response to public market volatility and declining returns.

Retail investors are expected to play a growing role in this expansion as well. Bain projected that retail contributions to AUM will rise from 16% in 2022 to 22% by 2032, driven by the appeal of diversification and higher returns, despite the lower liquidity associated with private assets. Habbel noted that demand from retail investors has prompted leading companies to innovate, offering products such as intermittent liquidity solutions tailored to this market segment.

Asset managers

As the landscape of asset management evolves, Bain observed a convergence in strategies between traditional and alternative asset providers. The report identified two key tactics likely to dominate the market: offering niche products to attract high-net-worth individuals and achieving large-scale production to meet growing demand.

In the report, Bain outlined five crucial areas where asset managers should concentrate their efforts to stay competitive. These include clearly defining their objectives and strategies in the private markets, ensuring a thorough understanding of their starting point and ultimate goals. Developing new capabilities across both front and back offices will be crucial, involving the training of salesforces, onboarding of product specialists and redesigning of operations to bridge the gap between private and public market systems, said Bain.

Furthermore, companies will need to communicate effectively with investors about liquidity options and the ability to collateralise private assets, helping to build confidence and understanding. Bain also reminded that as digital platforms rise, firms must enhance their brand awareness, fundraising capabilities and asset offerings. This will require hiring and training sales representatives skilled in building relationships with wealth managers and explaining complex products to retail clients.