The rise of private markets

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Giorgio Libotte

In 2017 asset managers raised a record sum of $750 billion. More and more investors are attracted by the potential for alpha.

Private markets (PM) had another strong year in 2017: global fundraising and assets under management (AUM) reached record highs, despite managers once again faced mild difficulties to deploy capital as deal count fell, multiples went up, and dry powder increased for its ninth consecutive year. In the McKinsey report "The rise and rise of private markets", that analyzes 2017 performance with the full year's data across five asset classes - private equity, infrastructure, private debt, natural resources, and real estate - examining capital flows and deployment, we review dynamics between Limited Partners (LPs) and General Partners (GPs), and identify several emerging trends, including LPs beginning to form deeper and more strategic relationships with a smaller set of managers.

Regarding capital flows, private asset managers raised nearly $750 billion globally in 2017, a true record and an extension of the cycle that began 8 years ago. Private equity and debt enjoyed large increases, by 11% and 10% respectively, while other (typically smaller) asset classes fell: natural resources by 5%, and infrastructure by 4%. It was the second year of double-digit growth for private equity. (..)