The Red Thread

Private Markets, Edition December 2024

Our semi-annual insights into private markets

An introduction from Alex Leung,
Head of Research & Strategy,
Infrastructure

It gives us great pleasure to announce that going forward, we’ve teamed up with The Red Thread as a means of connecting thinking across our industry. We believe that by unearthing the key threads that run though market trends, our readers should be able to see opportunity and risk with greater clarity.

While the current market landscape is hardly ‘predictable’, it does seem to have fallen into a pattern of sorts lately. Macro indicators have been stabilizing – economic growth remains stable and has surprised to the upside in some regions, greatly reducing hard-landing risks. Though long-term rates have remained higher for longer despite recent rate cuts, the direction of travel is cle ar so risks have been priced in.

Private markets have faced headwinds from the denominator effect following weakness in public equities in 2022. But global equities are up 40% in the past two years, which should reduce any straggling adverse impacts. With the biggest election year in human history already behind us, it seems reasonable to say that the problems ahead are more known than unknown, as least compared to 12 months ago.

Investor sentiment remains subdued in 2024. Private markets fundraising continues to be challenging, but dry powder for private markets is also at the lowest level since 2021. When measured as a percentage of total assets under management, dry powder is at its lowest level ever.

Overall, an undeniably healthy macroeconomic backdrop is combined with strong equity markets and more clarity around global politics. Lower dry powder means less competition for deals, and with the increasing visibility in the space, we believe the time for allocations to high-conviction ideas is now. We remain optimistic about private markets heading into 2025.

Read on for in-depth insights from our experts on how the macroeconomic developments may impact private markets investments.