Retail investors to drive boom in alternatives
The amount of private capital invested in alternative asset classes such as peer-to-peer lending is set to double by 2027.
According to a new report from Preqin, this demand will be fuelled by retail investors who are increasingly looking towards alternative asset classes such as private debt and P2P lending.
Preqin’s research found that high-net-worth investors have for the most part remained allocated to traditional investments. However, growing retail investor interest in private investments – especially among high-net-worth investors – is expected to be a key driver of future market growth.
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“Due to lower risk adjusted returns in most traditional public asset classes, investors have had to look further afield to find alternative sources of return,” said Christoph Knaack, chief executive of Preqin.
“However, the deterioration of the macroeconomic climate over the past year, from rising inflation and interest rates to geopolitical threats, means investors are now operating in a more challenging environment.”
Knaack noted that Preqin had seen continued demand for alternative assets such as private debt, which may be able to provide inflation protection.
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“Continued demand for these asset classes, coupled with a growth of retail investor interest in building allocations to alternatives, will drive private capital to new heights over the next five years,” he said.
Preqin has predicted that global alternative assets under management (excluding hedge funds) will be worth $18.3trn by the end of 2027 – up from $9.3trn at the end of 2021.
The report noted that private debt markets have proven to be resilient against a tough backdrop of weaker macroeconomic fundamentals, with assets under management forecast to grow at a rate of 10.8 per cent annually.
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