There is perhaps a latent, unspoken hope in the minds of many weary investors that things will eventually ‘go back to normal’. With each passing year, that hope becomes more remote.
2025 has certainly offered no indications of a return to the status quo ante. As investors continue to be buffeted by tariffs, geopolitical brinksmanship, and the longer-term demographic conundra that threaten many advanced economies, it’s natural that they should begin to seek novel remedies.
So, what is the “smart money” doing? In this article, we look at how the world's largest investors - including pension funds and sovereign wealth funds - are innovating to find growth.
Going Pprivate
Private markets - a broad category including private equity, private debt, infrastructure, real estate, and venture capital - are on track to account for nearly a third of all assets under management by 2032, according to Bain & Company.[1]
A raft of investor surveys conducted in the past 12 months - including studies by Goldman Sachs[2], S&P Global[3], and Ipsos[4] - confirms that investors are largely entering, maintaining, or doubling down on their allocations to private markets.
Most recently, a Barclays Private Bank survey released on October 31st found that 79% of investors actively participating in private markets expect to increase their allocations in the coming year, and 48% of those not invested are considering doing so.[5]
This comes after a temporary lull in fundraising for the private equity industry, due to the rapid increase in borrowing rates during the 2022-2023 war on inflation. The increase in rates pressured valuations and made new acquisitions more expensive, creating a temporary bottleneck.
Since then, private equity has adjusted to the new era. In 2024, distributions exceeded contributions for the first time since 2015 - meaning investors (Limited Partners) received more cash back from their investments than they contributed for new deals.[6] The recent decision of Kuwait’s pension fund (PIFSS) to resume its private market investing after a three-year pause[7] is the latest evidence of private investing’s new momentum.
The Core Appeal
We have covered in previous articles the core benefits offered by private markets investing: higher returns, improved diversification, and psychological insulation from volatility
From a target company’s perspective, raising private capital gives more breathing room, away from the burden of quarterly profit targets. From an investor’s perspective, it makes it possible to ‘get in on the ground floor’, as well as exert more control over the company’s strategy.
The ‘lull’ in private equity activity has left many funds ‘under-allocated’ to this asset class, signaling a steady influx of capital back into the field in the coming months and years.
Source: Goldman Sachs 2025 Private Markets Diagnostic Survey (page 15)
The New Strategy
The various surveys referenced above also offer insight into what is driving the renewed ascent of private markets. Goldman Sachs notes that operational value improvement via active ownership has become the main focus, replacing a reliance on pure financial engineering.
BNP Paribas also notes the increasing importance of thematic investing, given that a ‘rising tide that lifts all boats’ strategy can no longer be relied upon.[8]
Infrastructure is, according to McKinsey’s Global Private Markets Report 2025, the highest area of new commitment (46%) among Limited Partners. The IFM survey further revealed that investors are predicting returns for Infrastructure Equity to jump to 13.4%, in line with traditional private equity returns.
The rewiring of global trade, the green energy transition, and the AI revolution all require new infrastructure of some kind, be it manufacturing capacity, power generation, or airports and roads. This coming wave of investment offers a rare combination of growth and stability (through predictable, resilient cashflows).
Private fundraising is likely to be a critical part of funding this new wave, given the strain on many government budgets.
The Need for Due Diligence
If the benefits of private markets seem too good to be true, it should be added that they come at a cost - namely, stringent due diligence on the part of the investor. While financial engineering is sector-agnostic, operational value enhancement is business-specific, and hence rarer.
As demand for private markets investing increases, many funds will emerge looking to attract capital. This will lead to a more crowded field, consisting of both capable and less capable actors. The gap between well-performing and poor-performing funds will widen as a result.
In order to capitalize fully on the private markets opportunity, therefore, investors must be selective, seeking out managers with functional and sectoral expertise, demonstrated by a clear track record.