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Brookfield Asset Management, a major player in alternative investments, anticipates a significant shift in the investment landscape over the next 25 years, expecting alternative investments to largely supersede public markets.
Here’s a breakdown of why Brookfield and others in the private assets space foresee this trend:
* Growth of Alternative Assets: The global alternative market has seen substantial growth. From approximately $2 trillion (5% of global investment AUM) in 2002, it has expanded to an estimated $25 trillion (15% of the global investment market) today. Forecasters project this to reach $60 trillion by 2032, representing about 20% of the anticipated global investment market.
* Attractive Returns and Diversification: Alternative investments, including private equity, private credit, infrastructure, and real estate, often offer the potential for higher returns compared to public markets. They also tend to have a lower correlation with traditional stocks and bonds, providing valuable diversification benefits and reducing overall portfolio volatility.
* Longer Investment Horizon and Active Management: Private market investments typically involve a longer investment horizon, allowing for a focus on sustainable growth rather than short-term fluctuations. Private equity managers can also take a more hands-on approach, actively working with portfolio companies to drive value creation through operational improvements.
* Larger Opportunity Set: The universe of private companies is significantly larger than publicly traded ones. This expanded opportunity set allows for greater selectivity and diversification across various sectors and company life stages. Many companies are also choosing to remain private for longer, seeking less constraint in their growth strategies.
* Increased Investor Interest: High-net-worth individuals and institutional investors are increasingly allocating more of their portfolios to alternative investments, seeking enhanced returns, diversification, reduced volatility, and predictable cash flow. Even with economic uncertainties, demand for private markets, especially from larger asset managers like Brookfield, remains strong.
* Evolution of Capital Markets: The private credit and private equity markets have grown substantially, providing deeper capital pools for companies and reducing their dependency on public money. This means more capital is competing for a dwindling number of public stocks, making private investments more appealing.
While alternative investments offer many advantages, it’s important to note that they also involve higher risks, lower liquidity (making them harder to sell quickly), and often higher fees compared to traditional investments. They are generally considered suitable for sophisticated investors due to their complexity and illiquidity.

Video courtesy of Interactive Brokers

Video courtesy of Interactive Brokers