Private Markets: How Big Can They Get?


Andrew Murray
Managing Director, Private Equity

Last Week...

  • The April Consumer Price Index (CPI) report showed a 0.3% monthly increase and a 3.4% annual rise, with core inflation at its lowest since April 2021. This led to market optimism but caution from the Fed about cutting interest rates.
  • Fed Chair Jerome Powell reiterated the Fed's plan to maintain high interest rates while awaiting clearer signs of inflation easing, expressing less confidence about when rate cuts might occur due to recent inflation setbacks.
  • The Dow surpassed 40,000 for the first time, while the S&P 500 and Nasdaq Composite also hit record highs, buoyed by positive inflation data.
  • Home prices are falling in some cities in Florida and Texas due to increased home-building activity, which is putting more properties on the market and shifting the leverage to buyers.
  • The European Central Bank (ECB) reports eased financial stability risks but warns of ongoing high geopolitical and policy uncertainties.

The growth of private equity over the past decade has been fueled by ultra-low interest rates, a decline in the number of public companies, and a surge in new businesses. From 2012 to 2022, assets under management (AUM) in the private capital markets grew at an annualized rate of 12.8%.1 While these trends have been consistent, investors now face uncertainty about what to expect moving forward.

Recent media coverage of private equity has focused on the slowdown in distributions, lack of tech IPOs, and headwinds created by higher interest rates. This might suggest trouble ahead. While these factors certainly have contributed to a slowdown in mergers and acquisitions (M&A) and led certain investors to over-allocate to the asset class, we believe that these are relatively smaller obstacles in the broader growth trajectory of private equity.

Earlier this month, PitchBook published a report titled “Private Capital’s Path to $20 Trillion.” The report combines qualitative surveys and interviews with extensive data to create various scenarios forecasting AUM growth. While any forecast of this type is inherently imprecise, we believe it provides a reasonable outlook of what to expect in the next decade. As Figure 1 illustrates, the industry is expected to grow at a healthy rate for the foreseeable future. Notably, the analysis predicts faster growth in buyouts and private credit with more muted growth in areas such as venture capital (VC) and private real estate.

This view is supported anecdotally by other data points, such as Calpers’ recent increase in its PE allocation. Absent radical improvements in public market structures and changes in allocators’ mindsets, we expect another decade of robust growth in private equity AUM and an ever-increasing number of different strategies for investors to choose from.

[1] Source: PitchBook. Data as of 5/1/24.

Fig. 1: Private capital closed-end funds AUM ($T) forecast*

Source: PitchBook forecast generated as of 4/19/24.*

Disclosures & Important Information

Any views expressed above represent the opinions of Mill Creek Capital Advisers ("MCCA") and are not intended as a forecast or guarantee of future results. This information is for educational purposes only. It is not intended to provide, and should not be relied upon for, particular investment advice. This publication has been prepared by MCCA. The publication is provided for information purposes only. The information contained in this publication has been obtained from sources that

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