Private Market, just another asset?

Why all this enthusiasm for the unlisted market?

Whereas a few years ago it was considered a niche activity, the unlisted market now plays a major role in the economy as it enables investors to meet two major objectives: diversification and return. According to Preqin, global assets under management in 2024 will be in the region of $15 trillion, and are expected to reach $30 trillion by 2030¹, proof of the sector’s dynamic growth.

A dynamic market, but what strategies will be the most popular in 2025?

Private debt continues to gain market share from traditional banks as a more flexible financing tool for companies. Against a backdrop of falling interest rates, investors seeking to diversify continue to favour private debt, attracted by its recurring and predictable return and the level of average interest rates, which stand at around 10%² worldwide. This return is much higher than that of government or listed corporate bonds, to the extent that private debt assets under management, which stand at around $1.5 trillion globally, are expected to reach an all-time high of $2.640 trillion by 2029³.

Private equity and real estate, which had previously been penalised by the significant rise in interest rates, have regained their appeal following the reduction in key interest rates by the central banks, which could continue in 2025.

As the number of global IPOs decreases⁴, private equity plays a crucial role in financing companies, whether for organic growth projects, value creation or the launch of new businesses. The emergence of continuation funds reflects the resilience of the sector. Faced with the difficulty of liquidating certain assets as funds reach maturity, asset managers do not want to accept any decline in the performance of their investments and are prepared to transfer their best assets to continuation funds, thus allowing their clients to benefit from the expected value creation over the long term.

Given the urgent need to finance the energy transition and the desire of investors to make meaningful investments, the fall in interest rates could provide a breath of fresh air for the real estate sector, which has been severely penalised by the rise in interest rates. As a result, real estate transformation projects could once again attract the attention of asset management companies who had postponed their fund launches.

The democratisation of unlisted shares, the industry’s new Eldorado....

Since the Green Industry Act now ensures that a portion of personal life insurance savings is directed to the unlisted segment, retail investors have naturally turned to these new investment opportunities to take advantage of attractive returns. The potential is immense for management companies seeking to benefit from this new growth driver and thus attract the related client base by taking advantage of the entry into force of ELTIF 2.0. The challenge is significant for market players to adapt products to this new client base, which by nature needs more liquidity but also seeks to enjoy attractive returns while controlling its risks.

Against this backdrop, fund-of-funds investment strategies offer a good level of diversification and enable individuals to achieve a solid risk/return ratio.

Will unlisted assets become an asset class like any other?

The multiple strategies of the unlisted market have kept all their promises. They are now attracting all types of investors thanks to their expected returns, which are significantly uncorrelated from other asset classes and have become an essential part of diversified portfolios. Despite the reversal of the situation on interest rates, these markets were able to find new development opportunities, with a dynamism that has never disappointed. As a continuous creator of new players, will this market be dominated by a constellation of specialists or by large management companies, better able to manage significant volumes? The movement is already underway. Following the example of management in listed markets, unlisted has begun the shift towards consolidation, which some see as the beginning of normalisation. So: is unlisted an asset class like any other?

Julien Aïdan & Amandine Bozier, Product Engineers on Private Equity & Real Estate funds, Societe Generale Securities Services

¹ Preqin
² Preqin: global private debt performance (IRR 2020-2023)
³ Preqin
⁴ S&P Global “Private equity take-private deals hit 16-year high” Nov. 1, 2023