Private Markets Set for 90% Growth Over Next Decade Despite Headwinds, Morningstar Says
- Editor
- Mar 9
- 2 min read
What's New
According to Morningstar's recent U.S. Asset Manager Industry Landscape report, alternative assets are projected to grow from $14.6 trillion to $27.3 trillion by 2033, representing 90% growth despite an expected slowdown in fundraising as institutional allocations approach natural limits.
Why It Matters
Private markets have enjoyed exceptional growth over the past decade but face new challenges as institutional allocations approach ceiling levels of 25-26% of portfolios and traditional asset managers increasingly encroach on the alternatives space, creating heightened competition for capital.
Big Picture Drivers
Allocation ceilings are emerging as institutional investors approach 24% allocation to alternatives, with Morningstar projecting a natural ceiling around 25-26%, limiting future growth.
Performance advantage persists as private equity has consistently outperformed other alternative segments, generating average annual returns of 16.3% over the 2014-23 period.
Consolidation accelerating with the five largest alternative managers (Blackstone, Apollo, KKR, Ares, Carlyle) controlling 21% of market share, up from 16% in 2014.
Traditional encroachment intensifies as firms like BlackRock and Franklin Resources push aggressively into the alternatives space with potentially lower fee structures.
Democratization continuing as private markets firms expand access beyond institutional investors into private wealth channels to sustain growth.
By The Numbers
$14.6 trillion: Total alternative assets under management in 2023, including $3.8 trillion in dry powder
6.5%: Projected average annual growth rate for alternatives through 2033
$12.7 trillion: Total capital raised by alternative managers during 2014-23
$4.6 trillion: Amount raised specifically for private equity during 2014-23
83%: Percentage of capital raised during 2022-24 going to established managers with brand recognition
Key Quotes
"With demand for alternative assets eventually maturing, we expect total AUM levels to increase close to 90% (or 6.5% on average annually) from $14.6 trillion at the end of 2023 to $27.3 trillion at the end of 2033."
"But the expansion has its limits, as we have already gone from having 14% of institutional invested capital dedicated to private markets in 2008 to an estimated 24% at the end of 2023."
"While the alternative-asset managers have enjoyed a long period of exceptional growth, we think the future will be much harder for them than in the past, and not just because allocation percentages are likely capped in the long run."
Key Trends to Watch
Fee compression will accelerate as more players enter the space and institutional investors reach allocation limits, increasing bargaining power.
Private wealth channels will become battlegrounds as alternatives firms seek new growth avenues beyond saturated institutional markets.
Traditional asset managers will leverage fee flexibility to gain market share against established alternatives players.
Mega-funds will continue dominating fundraising with 74% of capital going to funds over $1 billion during 2023-24.
The Wrap While private markets remain positioned for significant growth, the industry is transitioning from its "golden era" to a more mature phase characterized by intensifying competition, fee pressure, and shifting distribution channels—forcing managers to adapt their strategies to maintain growth and profitability.
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