Schroders forecasts 2025 as ‘vintage year’ for private credit
Schroders has predicted that 2025 will be a strong vintage in which to invest in private credit as technological disruption, emphasis on decarbonisation, and geopolitical tensions persist.
In the firm’s Private Markets Outlook 2025 it highlighted three cycles that set up next year to be a valuable year for investors.
Firstly, fundraising shows signs of reduced competition for new investments, more attractive entry valuations and greater performance potential, although this is happening to varying degrees across different sectors.
Small and mid-buyouts and venture capital were highlighted as the most attractive opportunities, while continuation funds are also expected to continue seeing high growth.
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Elsewhere, in real estate, after steep price declines through 2024, Schroders’ outlook report said, “a bottom building in global real estate valuations and our models indicate that 2025 will be an attractive vintage year.”
Secondly, the firm highlighted opportunities off the back of a new cycle of technological innovation as artificial generative intelligence gains traction. “We expect its impact to be as significant as, or even greater than, previous technological disruptions such as the personal computer, internet and smartphone,” the report said.
This comes alongside the ongoing decarbonisation agenda which continues to present new investment opportunities.
Read more: Private credit to deliver high single digit returns next year
Finally, the current economic cycle paints a positive outlook for 2025 with central bank interest rate normalisation having started in the US, the UK and Europe, alongside new stimulus measures in China.
The firm is hopeful that the economic cycle is set to move from contraction to expansion, “providing tailwinds across asset classes, including private markets.”
Moreover, as geopolitical uncertainty continues into next year, private markets are regarded as uniquely resilient throughout volatile economic and geopolitical periods.
“Thanks to concentrated investments in sectors underrepresented in public markets, such as, for example, healthcare, renewable infrastructure, disruptive technology and microfinance, private markets offer differentiated exposures that provide positive portfolio diversification,” the report said.
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