Private Wealth to Pour $9 Trillion into Alternatives by 2032
- Editor
- Mar 23
- 2 min read
What's New
iCapital's Alternatives Decoded Q1 2025 report reveals private wealth investors are poised to dramatically increase their alternative investments allocation from $4 trillion currently to $13 trillion by 2032, growing at a 12% annual rate—significantly outpacing institutional investors' 8% growth rate.
Why It Matters
This massive capital shift comes as private wealth clients control roughly $150 trillion globally—equivalent to institutional capital—but currently allocate just 3-6% to alternatives compared to institutions' 15-30%, representing a substantial untapped opportunity in the alternatives marketplace.
Big Picture Drivers
Underallocation: Out of 263,000 U.S. advisors, only 36% currently allocate client assets to alternatives, despite showing strong outperformance versus traditional portfolios.
Returns: Private market alternatives have consistently delivered superior risk-adjusted returns, with private equity generating 14.6% annual returns over the past decade versus 9.4% for global equities.
Diversification: Alternatives maintain low correlation to public markets (many below 0.5), providing effective portfolio diversification as traditional 60/40 correlations have risen to 0.56 since 2022.
Yields: Private credit currently offers yields of 10.4%, substantially higher than global bonds (3.4%), providing income-focused investors compelling alternatives in today's market environment.
Access: The growth of registered fund structures has improved accessibility, with these vehicles growing from 15% to 35% of platform assets between 2020-2024.
By The Numbers
$17.2 trillion: Current global alternatives AUM across all strategies
$29.2 trillion: Projected alternatives AUM by 2029 (10.1% CAGR)
14.2%: Expected growth rate for private equity buyout funds through 2029
9.8%: Forecasted annual growth rate for private credit through 2029
$15 trillion: Infrastructure spending gap between projected spending and society's needs by 2040
Key Trends to Watch
Private credit expansion continues beyond direct lending into asset-based lending, where the $5.2 trillion current market could reach $7.7 trillion by 2027 as banks withdraw from lending activities.
Data center infrastructure represents a significant growth opportunity as global data creation is projected to grow more than 10x from 2020 to 2030, driving $49 billion in annual construction spending by 2030.
Value-add real estate strategies are gaining traction as nearly 50% of U.S. commercial buildings are over 45 years old, requiring substantial renovation spending forecasted to reach $474 billion by 2028.
Structured investments and annuities are experiencing robust growth as private clients seek investments with downside protection, with the annuity market growing 12% in 2024 to $432 billion.
The Wrap
As traditional 60/40 portfolios face challenges from higher stock-bond correlations and muted forward return expectations, private wealth investors are positioned to substantially increase their alternative allocations, narrowing the gap with institutional investors while seeking enhanced returns, better income generation, and portfolio diversification.
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