We dive deep into the defining trends shaping private markets in the first episode of our midyear Private Markets Outlook series. Join Andrew Korz, Senior Vice President of Investment Research, and Alan Flannigan, Investment Research Associate, as they explore the forces driving the new private markets imperative: pursuing alpha through specialization and operational excellence.
The Private Markets Outlook podcast series will feature special guests and portfolio managers from across our firm, each bringing unique perspectives on private equity, private credit and real estate. Subscribe and stay tuned for more.
Alan Flannigan: Follow the value, not the herd. Know that's not a Robert Frost poem.
It's the title of our midyear 2025 Private Markets Outlook, published in late July alongside our new brand and new name Future Standard. The outlook not only takes stock of where markets stand more than halfway through 2025, it lays out our core thesis that we're entering a new era of private markets investing.
Despite the incredible volatility present in policy making, economic data, and the public markets the first seven months of the year, were another gradual step forward for private capital markets. The number of private equity transactions completed rose 8% compared to 2024, while real estate investment volume improved by 13%. Although these numbers may seem pedestrian compared to the robust expectations [00:01:00] coming into the year, they imply an impressive resilience in the face of serious market dislocations. Policy uncertainty, higher interest rates, and slower economic growth will likely keep the most rambunctious of animal spirits tamed for the foreseeable future. However, many of the conditions for a rebound in market activity, including ample capital, pent up demand for deals and solid fundamentals in many sectors remain in place. Our outlook doesn't just analyze the cyclical, rebound and deal activity. We spend the bulk of the report discussing how to invest into it.
We see private markets being on the precipice of a new era. The period from 2010 to 2021 was dominated by unique dynamics brought about by ultra low interest rates and ample liquidity. The past three years have been a transition period with markets reacting to the most aggressive fed hiking cycle in decades.
Now we see the emergence of new [00:02:00] trends beginning to shape and define this new era. First. Fundraising across asset classes is increasingly concentrated within the largest managers and strategies. This raises competition for large deals and will likely make it more challenging for these managers to produce alpha.
Second, we're in a durably higher interest rate environment. This means returns will be dictated less by leverage and valuation expansion and more by the operational performance at the asset level. Third, the era of placid globalization is over ushering in a period of greater geopolitical competition and policy uncertainty.
This creates new challenges, especially for globally oriented firms, but also introduces new opportunities. We believe that these are the three trends that will define the next era. Of private markets investing and we're going to dive deeper into some of the research behind and implications of these views on this [00:03:00] episode.
And for that, I'm happy to welcome in our Executive Director of Investment Research and my esteemed podcast co-host Andrew Korz.
Andrew Korz: Alan, how's it going?
Alan Flannigan: Doing well, thanks for being here today.
Andrew Korz: Thanks for having me.
Alan Flannigan: So Andrew, we're, we're here to discuss the private markets outlook, the mid-year 2025 outlook for our firm.
