forbes.com
Private Market Assets Reach \$22 Trillion Despite Traditional AUM Slowdown
In 2024, private market assets totaled \$22 trillion, with alternative capital sources like separately managed accounts and co-investments driving a 6% growth rate, exceeding the growth in traditional closed-end funds that declined by 1%.
- What is the true size of the private market in 2024, and what factors have driven its growth despite the apparent slowdown in traditional AUM metrics?
- Private market assets reached \$22 trillion in 2024, with growth driven by alternative capital sources like separately managed accounts and co-investments, which now represent nearly one-third of total assets and grew 6% in 2024. This contrasts with a 1% decline in traditional closed-end funds, highlighting the limitations of traditional AUM metrics.
- Why is a redefinition of AUM necessary, and what are the implications of failing to update the measurement for investors, regulators, and market participants?
- The inaccurate representation of private market growth using traditional AUM metrics necessitates a redefinition to include alternative capital sources. This updated measurement would accurately reflect the market's true size and dynamism, signaling its evolution into a more accessible, flexible, and resilient asset class, attracting more investors and driving further growth. Failure to adapt the metrics could misrepresent the market's actual health and potential.
- How are the three fundamental trends (higher-liquidity products, LP-demand-driven offerings, and permanent capital) reshaping capital flows into private markets and contributing to overall growth?
- The shift towards alternative capital reflects three key trends: higher-liquidity products (e.g., evergreen funds) offering greater investor flexibility; LP-demand-driven offerings (SMAs and co-investments) providing customized exposure; and permanent capital (long-duration pools) enabling long-term investment strategies. These trends have driven significant growth in alternative capital, exceeding the growth in traditional closed-end funds.
Cognitive Concepts
Framing Bias
The headline and introduction initially suggest a slowdown in the private market, creating a sense of concern. However, the article quickly reframes the narrative, emphasizing the growth of alternative capital sources and ultimately portraying a positive outlook. This framing, while not inherently biased, selectively highlights positive trends and downplays negative ones. The choice to focus on the growth of alternative capital (6% growth) versus the decline of traditional capital (-1% decline) immediately frames the narrative in a more optimistic way. The article further reinforces this positive framing through its use of terms like "healthier" growth rate and "dynamic" industry.
Language Bias
The article uses positive and optimistic language to describe the growth of alternative capital sources. Terms like "healthier," "dynamic," and "resilient" are used to portray the private market in a favorable light. While these words aren't inherently biased, their consistent use contributes to an overall positive framing. The use of phrases like "have-it-your-way" deals also subtly influences the reader's perception by emphasizing the benefits for investors. More neutral alternatives could include describing these deals as offering more customized options or tailored exposure.
Bias by Omission
The article focuses heavily on the growth of alternative capital sources in private markets, but omits discussion of potential downsides or risks associated with these newer investment vehicles. While acknowledging a slowdown in traditional AUM, it doesn't explore the reasons behind this decline or potential consequences. Furthermore, there's no mention of regulatory challenges or concerns that might arise from the increasing dominance of alternative capital structures. This omission could leave the reader with an overly optimistic view of the private market's health and growth potential.
False Dichotomy
The article presents a false dichotomy between traditional AUM metrics and alternative capital sources, implying that one is inherently superior to the other. It frames the situation as a simple choice between outdated measurements and a more accurate reflection of the market's health, neglecting the complexity of interpreting both types of data and their respective limitations. While it acknowledges a 1% decline in closed-end funds, the piece largely downplays the significance of that information.
Sustainable Development Goals
The article highlights a shift in private market capital, showing growth in alternative forms of capital such as separately managed accounts and co-investments. This signifies a more dynamic and innovative financial landscape, contributing to economic growth and potentially creating more diverse job opportunities within the financial sector and related industries. The increase in assets under management, even with adjustments in measurement, indicates positive economic activity and investor confidence.