Private markets has become an umbrella term to refer to assets that are not liquid, not traded on organised market exchanges and are spread across different segments such as private equity, real estate, private credit and infrastructure.
The new value creation playbook, examines prospects for four primarily illiquid asset classes of private equity, infrastructure, real estate and private credit across a range of scenarios for 2019-2025.
Private equity is equity capital invested in private companies.
Investors hope that by investing in private companies they can increase a company’s value and sell their stake at a later stage through a trade sale, buyout, a recapitalisation or through listing the company on public markets through an initial public offering.
Private debt funds typically target the ownership of credit issued by private companies that either seek more flexible financing terms or are neglected by banks due to the complexity of transactions.
Private equity investments represent the majority of investments in private markets.
They project significant growth for the value of private markets of $5.5tn, $4.9tn and $4.2tn depending on how global economic conditions respond to the disruption caused by COVID-19.
Investing directly into private companies is known as direct or co-investments where there is no middleman.
In this instance, it is important to have a deep knowledge of the sector of the company you are investing in. This allows the investor to be directly involved in the growth story of a company and realise returns on exit.
Even in the worst case scenario of a prolonged recession, the projections look ahead to growth of almost 50% up to 2025.