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BlackRock’s 2024 Private Markets Outlook Forecasts Continued Growth Across Asset Classes

  • Several mega forces will lead to higher-quality opportunities emerging across infrastructure, private debt, private equity and real estate in 2024
  • Assets on track to reprice, creating attractive entry points for new vintages across private asset classes

BlackRock today released its 2024 Private Markets Outlook, with investment views on how private markets – spanning different sectors, geographies, investment styles, and risk appetites – will evolve in the year ahead. Several mega forces including the low-carbon transition, digital disruption and AI, demographic divergence, the future of finance and geopolitical fragmentation, are expected to offer major investment opportunities in the coming year, despite significant headwinds in 2023.

“Private markets are evolving rapidly and presenting substantial opportunities that can be captured with the right strategy. We expect private markets will remain an attractive option for investors to deploy capital in 2024 and beyond,” said Edwin Conway, Global Head of Equity Private Markets, BlackRock. “While the macroeconomic volatility we saw this past year resulted in more capital left on the sidelines, we expect new higher-quality opportunities with favorable deal structures to emerge for investors across asset classes in the year ahead.”

Infrastructure: Resilience and growth driven by the adoption of low-carbon energy sources

As an asset class, infrastructure is having a moment. As the backbone of the economy, infrastructure offers steady cashflows with long-term, inflation-linked contracts that can span decades – a significant advantage in a volatile environment.

The need to reconfigure the global energy system to decarbonize the economy is one driving mega force that presents considerable long-term private markets investment opportunities in infrastructure development, particularly around energy storage, the electrification of transport, and alternative fuels for aviation and marine.

The BlackRock Investment Institute Transition Scenario predicts that the adoption of low-carbon energy sources could result in an average of USD $4 trillion per year of capital investment in the global energy system through 2050, up from around $2 trillion per year at present, with low-carbon energy sources making up around 70% of the world's energy by 20501.

Private Debt: Dispersion, not disruption

The structural shifts in the public financing markets – another mega force – have enabled private debt to continue to grow, cementing its status as an established asset class suitable for a wide range of long-term investors. While direct lending is the largest private debt strategy type, the “mix shift” of private debt fundraising varies from year to year, and in 2024, the higher cost of capital is likely to impact sectors and firms differently, due to their varying degrees of pricing power, business strength, and capital-structure management2.

As the private credit market evolves, it is leading to a dispersion of sources from which companies can raise capital. Borrowers are increasingly looking for flexible capital or customized funding solutions with many running a “dual track” process, using private and public funding sources simultaneously. The banking industry meanwhile is serving ever-larger borrowers, leaving a hole in the middle-market for private market lenders to step into. BlackRock estimates that the global private debt market will reach $3.5 trillion3 in AUM by year-end 2028.

Private Equity: Adjusting to a new era

Private equity is in a period of adjustment in the current era of higher rates and market uncertainty. BlackRock maintains a positive view on the asset class and the ability of the marketplace to adapt, given its historical outperformance during times of market volatility, new unique investment opportunities generated by the mega force of artificial intelligence technology advancement, and several signs that the deal landscape could be attractive for buyers:

  • Sellers are motivated as there has been little to no access to the IPO market and low buyside sponsor demand over the last two years4.
  • Stability is returning to the debt markets, contributing to a more favorable borrowing environment.
  • An increase in corporate carve-out activity should generate additional opportunities for private equity to acquire non-core divisions with proven business models and untapped potential.
  • Volatility in the public equity markets and the higher rate environment will continue to put pressure on valuations, forcing buyers to price deals more conservatively to preserve returns5.
  • The need for realizations and maturing capital structures in a deal-challenged environment are driving private equity owners to evaluate minority sales and structured capital raises – presenting attractive risk-return dynamics and a buyer-friendly market.

BlackRock is optimistic that deal activity will accelerate in the near-term and produce attractive returns for private equity buyers with access to capital.

Real Estate: Value in volatility

A window of opportunity is opening for real estate investors. In today’s dislocated macroeconomic environment, investors can purchase high-quality assets at attractive prices – often below replacement cost. In addition, BlackRock sees a mega force, shifting global demographics, as driving dispersion in real estate performance.

Two giant generational cohorts – the Baby Boomers and Millennials – are moving to new phases of life over the next several years, which will affect real estate trends. Millennials are growing their families, resulting in an increased demand for affordable housing stock and related necessity retail (e.g., supermarkets, strip mall complexes) and service providers (e.g., childcare centers).

At the same time, the aging of the world’s Baby Boomers as a “silver wave” will boost demand for destination retail and hospitality properties6. And as they age, these Baby Boomers will also increase the global need for medical office space. To harness this mega force successfully, investors need an acute understanding of the particular social, economic, and cultural trends in specific regions, countries, and micro-locations. Not all opportunities in this environment will be created equally.

About BlackRock Private Markets

BlackRock’s private markets platform serves investors seeking outperformance in infrastructure, private debt, private equity, real estate, and multi-alternatives solutions. We strive to bring our investors the highest quality opportunities by drawing upon our global footprint, superior execution capabilities, proprietary technology, and position as a preferred partner. As of September 30, 2023, BlackRock manages US$317 billion in liquid and illiquid alternative investments and commitments on behalf of clients worldwide.

Disclaimer

FOR PROFESSIONAL, INSTITUTIONAL, WHOLESALE AND QUALIFIED INVESTORS/PROFESSIONAL, QUALIFIED AND PERMITTED CLIENT USE ONLY

RISKS

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

IMPORTANT INFORMATION

This material is provided for educational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are subject to change. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Reliance upon information in this material is at the sole risk and discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any investor.

This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, and estimates of yields or returns. No representation is made that any performance presented will be achieved by any BlackRock Funds, or that every assumption made in achieving, calculating or presenting either the forward-looking information or any historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy.

In the U.S., this material is for Institutional use only – not for public distribution.

FOR PROFESSIONAL, INSTITUTIONAL, WHOLESALE AND QUALIFIED INVESTORS/PROFESSIONAL, QUALIFIED AND PERMITTED CLIENT USE ONLY

Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer. If you are an intermediary or third-party distributor, you must only disseminate this material to other Professional Investors as permitted in the above specified jurisdictions and in accordance with applicable laws and regulations. THE INFORMATION CONTAINED HEREIN, TOGETHER WITH THE PERFORMANCE RESULTS PRESENTED, IS PROPRIETARY IN NATURE AND HAS BEEN PROVIDED TO YOU ON A CONFIDENTIAL BASIS, AND MAY NOT BE REPRODUCED, COPIED OR DISTRIBUTED WITHOUT THE PRIOR CONSENT OF BLACKROCK.

©2023 BlackRock, Inc. or its affiliates. All Rights Reserved. BLACKROCK is a registered trademark of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.

_________________________________

1
Source: BlackRock 2024 Private Markets Outlook, December 2023.

2 Source: BlackRock, Preqin. As of each calendar year-end. 2023 is as of March 2023.

3 Source: BlackRock, Preqin. Historical (actual) data from Preqin, as of each calendar year-end, through March 31, 2023 Forward looking estimates may not come to pass

4 Source: Deallogic, data as of October 31, 2023.

5 Source: LCD News and Bloomberg, data as of October 27, 2023.

6 Source: Oxford Economics and BlackRock, as of September 2023. There is no guarantee that any forecasts made will come to pass.

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