Carlyle's Schwartz Sees Economic Uncertainty Reinforcing Private Markets Strategic Importance

What's Happening: 

In his 2024 shareholder letter, Carlyle CEO Harvey Schwartz explains how global economic uncertainty and geopolitical tensions are making private markets increasingly critical to capital formation and value creation, as public listings decline and private enterprise growth accelerates.

Why It Matters:

• Transformation: Volatile public markets and geopolitical fragmentation are shifting more economic activity into private markets before companies go public, if ever.

• Access: With U.S. public companies down nearly 50% while private companies are up 500% since 2000, investors need new approaches to capture growth opportunities.

• Scale: Private markets have evolved beyond alternative assets to become primary drivers of innovation, job creation, and wealth generation.

Big Picture Drivers:

• AI revolution: The rapid advancement of artificial intelligence is creating extraordinary demand for data centers, energy infrastructure, and computing power, with $1.8 trillion of capital expected to be deployed by 2030.

• Supply chain realignment: Companies are prioritizing onshoring, domestic manufacturing, and investment in defense and energy security in response to geopolitical tensions and trade disruptions.

• Financial democratization: Individual investors are gaining access to private markets through new investment vehicles and technology platforms designed for broader participation.

By The Numbers:

• Manufacturing surge: U.S. manufacturing construction spending has more than doubled since 2021, surpassing $200 billion annually amid supply chain recalibrations.

• Performance growth: Carlyle's Fee Related Earnings reached $1.1 billion in 2024, increasing nearly 30% with margins expanding to 46%.

• Capital acceleration: The firm attracted $41 billion in new investments during 2024, bringing its two-year inflow total to over $100 billion.

Key Trends to Watch:

• Private credit expansion: Now a $1.8 trillion market, private credit has become a critical source of corporate financing, with direct lending more than doubling in 2024 to over $300 billion.

• Insurance capital shift: Insurance companies are increasingly deploying capital into private markets, particularly private credit, seeking stable long-duration returns and better asset-liability matching.

• Wealth management evolution: More than 90% of financial advisors plan to increase their private markets allocations in the next two years as access continues to expand.

Key Quotes:

• Paradigm shift: "Private markets are no longer just an alternative—they are a primary engine of capital formation and economic progress."

• Value creation: "This seismic shift means a growing share of the economic activity that drives wealth creation—hyper-growth, innovation, and scaling into market leadership—is now occurring before companies ever reach the public markets."

• Strategic imperative: "For investors seeking to capture the next era of economic expansion—and alpha generation—understanding the evolving role of private markets is more essential than ever."

• Strategic opportunity: "We recognize that the current environment is marked by complexity... But with disruption comes opportunity."

The Wrap: 

As global uncertainty reshapes investment flows, Carlyle is positioning itself at the intersection of major structural shifts—from AI revolution to supply chain realignment—where private markets offer both stability during volatility and access to tomorrow's economic growth engines before they reach public markets.