Private markets: Building what’s next
Key takeaways
- Housing, highways and hydropower: These types of large, long-lasting assets form the backbone of the global economy. That backbone is evolving faster than ever as digitalization, deglobalization and decarbonization transform economies.
- Enormous investment will be needed in the coming years – to modernize existing infrastructure, overhaul energy systems and invest in housing. These assets are increasingly being financed, owned and operated within private markets.
- That makes exposure to private markets important for investors who want to be part of building tomorrow’s world. Indeed, institutional and retail investors have all been increasing allocations to private markets in recent years.
- The benefits of investing in private markets can be myriad. Assets are typically built to operate over decades, producing steady, reliable income across market cycles. They also serve as a source of portfolio diversification and often have inbuilt inflation protection.
- But private markets can be complex, so it’s important to select an investment partner wisely. Choose one that has the experience and resources to capture opportunities and manage risk effectively.
Introduction
The world is being transformed by digitalization, deglobalization and decarbonization. Economies can only thrive through this transformation if the backbone supporting them evolves and adapts—for example, roads, housing, ports and other large, long-lasting assets. In many countries, energy networks need to be overhauled as geopolitical tensions put energy security front and center, decarbonization gathers pace, and adoption of artificial intelligence, along with rising urbanization, create greater power demand.
Who builds, finances and owns this economic backbone is also changing.
Twenty years ago, governments owned most infrastructure and energy systems. Real estate markets were fragmented, with many local owners. Most long-term lending was done by banks. Private equity, private credit and renewable power were smaller, less developed markets.
Today, governments need to modernize infrastructure and energy systems but have limited budgets. Corporations are investing for the long term across infrastructure, AI and supply chains, but stricter regulations mean that banks have pulled back from long-dated and complex lending.
The result is a growing need for long-term owners who can finance these essential, capital-intensive assets and that have the operational expertise to run them. Those assets need to perform through economic cycles and require long-term capital aligned with long-term business plans. The required investment runs into the trillions of dollars.
Figure 1: Rising fortunes
Private capital AUM continues to grow
Source: PitchBook. The global universe of private equity, venture capital, real estate, debt, real assets, secondaries, funds of funds, and co-investment.
Private markets are increasingly stepping in to meet this need and are gaining growing attention as investors reassess how they build portfolios. Private equity, private credit, real estate and infrastructure markets are all now well established and will be central to the next phase of economic growth.
We believe privately owned and funded long-term assets can offer investors a range of benefits at a time of great change in the global economy.
“Capital is increasingly moving to real assets, where stable cash flows, inflation protection and downside resilience are very attractive.”Connor Teskey , CEO of Brookfield Asset Management
Examples of private market assets
Infrastructure
Much of the world’s infrastructure is aging and in need of renewal. Transmission lines, water systems, ports and roads must be upgraded to support population growth, urbanization and more resilient supply chains. At the same time, rapidly growing emerging economies—think India—require significant new infrastructure to support accelerating urbanization and a rising middle class. These are essential assets with long lives, steady demand and high barriers to entry.
AI is driving a rapid expansion of physical infrastructure. Power generation and transmission, data centers, compute capacity and cooling systems must all scale materially to support rising demand. These assets are capital intensive, complex to develop and critical to economic competitiveness. Once built, they are designed to operate for decades.
Energy
The energy transition requires a fundamental rebuild of the world’s power system. Renewable generation must expand significantly, grids must be modernized, storage integrated and electrification extended across transport and industry. This is a long-term effort, unfolding over multiple investment cycles and requiring sustained capital.
Private Equity
Countries are investing in domestic manufacturing capacity, supply-chain resilience and strategic industries. At the same time, industrial businesses are transforming their operations to improve productivity through automation, digitalization and AI. These investments are asset-heavy, long-term and central to future growth.
Real Estate
Demographic shifts are reshaping demand for real estate worldwide. In the U.S., we estimate $1.6 trillion of required investment. An aging population is driving sustained demand for senior living and life sciences facilities, while housing shortages persist across major metro areas. Meeting these needs will require new development, redevelopment and long-term ownership of housing and healthcare assets.
Private Credit
Private credit has scaled over the past 15 years into a genuine complement to the public credit markets. This growth is supported by the shifting role of banks, the changing preferences of borrowers, and the evolving appetite of clients. The core thesis underpinning private credit remains attractive to investors: Relative to public markets, it can offer a meaningful spread premium, additional structural protections, and access to a broader range of opportunities.
Six reasons to invest in private markets
- It's a way to own what's next
A growing share of economic activity now sits in private markets. Companies are staying private for longer, operating without the constraints of quarterly earnings pressure while maintaining access to long-term capital. As a result, public markets represent a shrinking share of where real investment and value creation are taking place.
Moreover, participation in public markets is becoming increasingly passive. In the U.S., total assets in passively owned funds surpassed those in actively managed ones for the first time in 2024 and the gap is widening. Within private markets, assets are actively owned and value is created over time through operational improvement. For investors seeking exposure to the backbone of the economy, private markets are where ownership resides.
Figure 2: Mostly funds
ETFs now outnumber company stocks in the U.S.
Source: Morningstar
2. A long-term focus allows good decisions to compound
Private investing allows owners to work directly with management teams over many years and through market cycles to improve operations, allocate capital and position businesses for durable growth. This can include:
- Improving cost efficiency
- Strengthening balance sheets
- Pursuing strategic acquisitions
- Repositioning assets to meet evolving demand
Importantly, these decisions are made with a long-term horizon free from short-term earnings pressure, allowing value to be built steadily over time rather than optimized for near-term optics.
Small but consistent improvements can build on each other, leading to much stronger performance in the long run. In the same way, investing in assets over the long term allows returns to compound.
Figure 3: Compounding magic
Small improvements have a big impact over time
3. They offer relative stability through economic cycles
Economies naturally go through ups and downs. How capital behaves through these cycles is what matters. Money is invested patiently in private markets and is typically deployed alongside operating expertise. Private assets tend to be tied to long-term contracts, essential services or regulated revenue, so their values tend to be less volatile when sentiment shifts, and they can be held through cycles. For investors concerned about managing volatility, that relative stability matters.
It is also why essential systems – from power and infrastructure to housing and industrial capacity – are often financed via private markets.
4. Private markets provide diversification
For some time, investors had been able to rely on the fact that when stock markets sell off, bonds tend to rise in value and cushion the impact. However, in recent years, global stocks and bonds have increasingly been moving in the same direction. That means bonds may no longer offer reliable protection during equity selloffs, so investors need to think more carefully about diversifying their portfolios.
Private markets’ relative stability when sentiment sours has a double advantage: They can help reduce volatility and they boost diversification because they move differently than public markets.
Figure 4: Diversification Benefits
Private markets exposure diversifies beyond stocks and bonds
Source: Bloomberg Cliffwater, FTSE Russell, MSCI, Preqin, S&P Dow Jones indices.5
5. They typically weather inflation better
Over the coming decade, inflation is likely to remain structurally higher and more volatile than it was in the 2010s. Why? Worker shortages, sustained wage pressure, reindustrialization, supply-chain reshoring and rising energy needs are all adding to underlying cost pressures. Geopolitical fragmentation increases the risk of periodic spikes.
Many private assets are positioned to weather a higher inflation environment. Infrastructure and real estate often include contracts that allow prices to rise with inflation. Private credit frequently uses floating-rate structures that adjust as rates rise. Essential services remain in demand regardless of price levels.
Figure 5: Outperformance amid inflation
Source: Bloomberg; Preqin.6
6. They may improve portfolio outcomes
Looking back at more than 20 years of data, our analysis shows that alternatives may provide attractive returns with less risk.
Figure 6: Enhancing outcomes
Source: Bloomberg, Cliffwater, MSCI, Preqin.7
“The benefits of real assets are always evident, but in this evolving environment they become an essential part of an investment portfolio.”Bruce Flatt , CEO of Brookfield
This is the time for private markets
We believe right now is a particularly interesting time to invest in private markets. The global economy is going through a period of change. And that tends to reset markets. This time is no different.
After years of rising interest rates and slowing deal activity, valuations have come down across private equity, real estate and infrastructure, creating attractive entry points for investors. And the extra yield available on private credit versus public credit remains enough to compensate for its illiquid nature.
For long-term investors, this environment resembles other periods that set the stage for strong future returns.
Looking back over time, private markets have a pattern. For example, private equity vintages launched in periods of uncertainty and low valuations tend to produce outsized returns. Each time, dislocation created opportunity—and patient capital benefited.
Figure 7: Lower can be better
Private funds vintages launched amid low valuations can produce outsized returns
Source: Bloomberg, Preqin.8
Today’s environment has many of the same ingredients: higher rates, more selective buyers, better pricing and less competition. History suggests this can lead to stronger future returns.
This doesn’t mean that investing is easy—conditions alone don’t determine outcomes. Discipline matters. Capital should be deployed selectively. Structures should be negotiated carefully. Underwriting assumptions should be more conservative than they were during the ultra-low-rate period. With that discipline in place, private market exposure could potentially deliver outperformance.
At the same time, the difference between top- and bottom-performing managers tends to be bigger in private markets than in public markets. That makes manager selection critical. Investors can benefit from working with managers who have the experience and resources to capitalize on opportunities and manage risk effectively.
“Investment success doesn't come primarily from "buying good things," but rather from "buying things well.”Howard Marks , Co-Founder of Oaktree and Chair, Brookfield Investment Solutions Group
Private markets are going mainstream
Given all of this, it’s perhaps no surprise that institutional investors, such as pension plans and insurance companies, have been steadily increasing their private allocations over time. In a 2025 McKinsey survey, leading institutional investors said that they will allocate more capital to private markets over the coming year. This is not a short-term response to market conditions, but an extension of a longer-term reallocation already underway.
What is changing now is the breadth of participation. According to the Deloitte Center for Financial Services, private wealth investors’ allocations to private capital could grow to $2.4 trillion in the U.S. by 2030, up from $80 billion today. In the EU, where private assets are already embedded in savings and pension products, Deloitte expects allocations to private capital to reach €3.3 trillion in 2030, up from €924 billion in 2024.
Product innovation and regulatory evolution have made it possible for individuals to gain access to private assets with lower minimums and more liquidity. And jurisdictions including the EU, U.K., U.S. and Australia are encouraging retirement plans and wealth platforms to incorporate private markets in their offerings and improve long-term financial outcomes.
With longer lifespans and more years in retirement, individuals are increasingly seeking return profiles that match long-term financial needs—something private markets are well positioned to provide.
Figure 8: Exponential growth
U.S. private wealth investors’ allocations to private capital is expected to grow dramatically by 2030
Source: Deloitte Center for Financial Services analysis.
What’s next
The world is moving through a period of profound transition. Building the economy of tomorrow requires capital that looks through cycles and supports long-term growth. For investors, private markets can help build resilient, diversified portfolios, while also offering exposure to many of the structural forces shaping the next decade.
Endnotes
- McKinsey & Company, “The Infrastructure Moment,” September 2025.
- Brookfield internal research
- CapGemini Research Institute, “The resurgence of manufacturing: Reindustrialization strategies in Europe and the US,” April 2024.
- Preqin, “Private Markets in 2030,” October 2025.
- Past performance is not indicative of future results. Performance shown for illustrative purposes only and does not predict or depict the performance of any investment. Indexes are unmanaged and cannot be purchased directly by investors. Global Stocks represented by MSCI World Index, Global Bonds by Bloomberg Global Aggregate Bond Index, Listed Real Estate by FTSE EPRA Nareit Developed Index, Listed Infrastructure by FTSE Global Core Infrastructure 50/50 Index after December 31, 2014, data from July 30, 2008 through December 31, 2014 by Dow Jones Global Infrastructure Index, Private Equity by Preqin Private Equity Index, Private Credit by Cliffwater Direct Lending Index, Private Infrastructure by Preqin Infrastructure Index and Private Real Estate by Preqin Real Estate Index. Source: Bloomberg, Cliffwater, FTSE Russell, MSCI, Preqin and S&P Dow Jones Indices. Correlations are based on historical returns from January 1, 2008, through December 31, 2025.
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