Comprehensive Year-Ahead Outlook for Key Asset Classes in 2024

Authored by: Alex Di Santo, Head of Private Equity, Europe
Updated on: April 30, 2024

As Featured in Global Custodian

Our thought leaders have put together some insightful year-ahead outlooks for the major alternative asset classes. This analysis could offer a valuable guide for anyone navigating the fund management landscape in 2024.

Private Equity

In 2023, the private equity sector overcame challenges like valuation criticisms and liquidity concerns, adapting to trends such as decarbonization. Looking to 2024, the sector is set for growth, with fundraising rebounding to pre-pandemic levels and a focus on quality investments in profitable companies. The small and middle market segments are promising, offering steady deals and attractive prices.

Buyouts in private equity are expected to remain robust, driven by the popularity of continuation funds and a long-term investment focus. Opportunities for value creation are particularly high in sectors recovering post-pandemic. Additionally, growth capital will continue to attract investors, especially in resilient sectors and companies with strong digital and sustainable practices.

Venture Capital

Venture capital, despite facing market volatility in 2023, shows potential for dynamic growth in the coming years. Key factors driving this optimism include lower market valuations, an influx of talent from the Great Resignation, and a shift of capital from sectors like crypto to emerging areas such as AI and machine learning technologies. The technology and healthcare sectors are expected to remain hotspots for venture capital investments, buoyed by ever-increasing innovation.

However, there will be increased scrutiny overvaluations, with a possible move to investing in more mature, revenue-generating startups. Additionally, the rise of impact investing, particularly in climate change and sustainability, geographic expansion, and diversification into areas like robotics and health tech, are also notable trends. Furthermore, the potential resurgence of corporate venture investing and the advent of AI-driven investing, automating risk assessment and data analysis, are poised to significantly influence venture capital strategies. This blend of factors indicates a venture capital landscape that is adapting to current challenges while capitalizing on new opportunities.

Private Debt

In 2024, the private debt market, evolving since the pandemic, is expected to further increase. The asset class will attract interest, particularly in stable sectors, as companies look for alternatives to traditional banking given banking stresses and the flexibility private debt offers.

The continued strong performance of private debt and in particular direct lending has attracted significant interest and we expect to see increased diversification from pure equity managers into the credit space. We expect investors to increasingly gravitate to multi-strategy managers that can offer both private equity and private debt allocations.

The focus for 2024 is intensifying on cost reduction amidst a challenging outlook with lower revenue expectations and concerns about increasing costs and limited availability of capital. Asset Managers are increasingly turning to outsourcing to enhance efficiency and technological capabilities.

The real estate investment landscape shows diverging trends: while residential and industrial properties may continue to thrive, commercial and retail spaces, along with office real estate, could struggle without adapting to changing consumer behaviors and the continued shift towards remote work.

Inflationary pressures perpetuate a difficult deals environment characterized by high interest rates, while geopolitical instability continues to impact the real estate industry. Asset refinancing, access to a narrowing definition of prime assets, market price corrections, digital capability, industry expertise and ESG all creates challenges but equally opportunities for asset managers to drive market outperformance in 2024.

Published on: April 12, 2024

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