Private capital market is set to grow at a 12 per cent annual rate on a compounded basis to $17 trillion in assets under management (AUM) over the next five years, Morgan Stanley analysts said on Friday, reports Reuters.
As one of the highest-returning asset classes in past years, the market stands at about $10 trillion, representing about 9 per cent of global third-party AUM, according to the brokerage.
Morgan Stanley listed five key factors powering its rise - democratisation of the markets, growth in private credit, increased infrastructure investments, rise of alternative liquidity options and focus on ESG investments.
"We see private market firms increasingly introducing products and strategies across the risk/return/liquidity spectrum, with wrappers and vehicles that cater to different investors," the brokerage said.
These factors could help the industry to tap into a total addressable market worth over $100 trillion, Morgan Stanley added.
"An expanded sandbox of private market capabilities makes 'alternatives' less alternative, instead opening a path for private markets as a substitute for traditional fixed income and equity," it said.
Morgan Stanley, however, acknowledged near-term challenges on a weak macro backdrop and recession concerns.
"It's less clear whether in a meaningfully higher interest rate environment, investors will continue to sacrifice liquidity for excess return," the brokerage said.
"Our growth thesis is predicated on continued, relative private-market outperformance relative to public markets, and asset allocation shifts in favor of private markets."
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