Partners Group Outlook | Private Markets Face Historic Shift as "Brave New World" Emerges

What's new: Financial markets are entering an era of persistently higher volatility and interest rates, forcing investors to fundamentally rethink traditional private market strategies.

Why it matters: This structural shift marks the end of the easy-money era, requiring investors to focus more on operational improvements and value creation rather than financial engineering.

The big picture: Three major forces are reshaping private markets:

• Interest rates will decline but stay above pre-COVID levels, with Fed rates reaching 2.5% by 2029

• Political polarization and deglobalization are creating new investment risks and opportunities

• Technology adoption, especially AI, is becoming critical for portfolio company success

By the numbers:

• The Fed plans 4-5 rate cuts in 2025 as inflation moderates

• Private credit expected to deliver 7-10% returns despite rate cuts

• Data center capacity needs to grow 16% annually through 2032 to meet AI demand

Key trends to watch:

• Private equity shifting focus from multiple expansion to operational improvements

• Infrastructure investors balancing climate goals with energy security concerns

• Real estate values stabilizing in most sectors while offices continue struggling

The bottom line for investors: Success in this "brave new world" requires disciplined underwriting, deep operational expertise, and alignment with secular trends like digitization and decarbonization. The era of relying primarily on cheap debt and multiple expansion is over.

Full Report Here