Private Market Expected Returns: Following a decade of robust growth, experts are anticipating market returns to be lower. Still, major asset classes are expected to provide significant returns over risk-free rate:
- #PrivateEquity expected returns to decline from 15.6% (last 5 years) to 11.9% p.a. due to slower growth, margin compression and limited space for multiple expansion.
- Private Equity asset class still on track to outperforming public markets (SP500 by 660 basis points; SP600 (small caps) by 400 bps).
- #PrivateDebt to deliver 8.3% p.a. return, thanks to higher credit quality, positive variable rates, and original issue discount.
- Private Infrastructure – underweighted asset class in many portfolios – to enjoy less favourable decade (12.2% > 8.2%).
- 2023/2024Y vintages expected to be good in Private Equity and Infrastructure markets, especially for managers, whose strategy includes carve-outs, public-to-private, and add-on acquisitions.
- Cash (US T-Bills) to generate 3.7% p.a. in the next 5Y (according to the graph, delay in data collection and publication). Current treasury yield for 5Y – 4.36%.
Source: KKR Insights / #alternativeInvestments #AssetAllocation
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