The Acceleration of Alternative Assets

A technologically advanced new world has left a significant impact on the financial industry, especially in the realm of alternative investment. Disruptive changes in the way we live and work has brought upon new lifestyles, creating new opportunities, and resulted in an acceleration of growth in alternative assets, such as real estate, infrastructure and private equity. The following shows a report analysis conducted by PwC Asset and Wealth Management Research Centre calculating the projected growth of alternative assets from year 2004 to year 2025.

Interest in alternative investment strategies are predicted to grow, resulting in an astonishing growth spurt - asset growth is projected to be almost double from year 2017 to 2025. Assets under Management is predicted to rise from USD 11.2 trillion in 2017 to reach USD 13.9 trillion, and then USD 21.1 trillion in 2025.

Infrastructure and Real estate is predicated to be the fastest growing sector - estimated growth numbers to be 26.7% from 2017 to 2020, and slightly slowing down to 15% from 2020 to 2025. The value of assets is estimated to increase beyond fivefold across that time period, from 0.8 trillion to 3.4 trillion. Real Estate is estimated to expand consistently with 7.3% in the first period, and 7.5% in the second, with the assets under management to grow almost double from 1.2 trillion in 2017 to 2.2 trillion by 2025.

Private equity will expand annually by 6.3% and 9.8% respectively, rising from 5.3% to 10.2 trillion in 2025.

Underlying fundamentals such as high capital and cheap debt, deal flow to be high, though quality assets will remain an issue and price expectations will be adjusted to global economic status. Depth of proficiency in managing portfolios will be the industry challenge, yet the structure of private equity allows for positive returns and value to be achieve, although spanning throughout a more lengthy time period and higher demanding operational management.

Hedge Funds will grow reasonably at 3.8% across 2017 to 2025, with asset value from 3.6 tn to 4.8 tn. Hedge funds firms will be in tight competition to meet high performance expectations or to provide innovative strategies to look for better value returns.

Alternative by type in US$tn (Base case scenario)

Note: Sums may not equal the totals shown due to rounding. Numbers in the oval represent CAGR.

Source: PwC Asset and Wealth Management Research Centre analysis.Past data based on Lipper, Hedge Fund Research and Prequin.