Alternative
Investments
Post-2020 Performance & 10-Year Outlook
Navigating the evolution of private markets through technological disruption and global transformation
Market Projection
Global alternatives AUM by 2030
Growth Rate
Annualized growth through 2029
Executive Summary
Post-2020, U.S. housing and tech-linked Real Estate Investment Trusts (REITs) like data centers and logistics facilities showed strong performance, alongside certain commodities such as gold, silver, and agricultural softs.
Looking ahead, private equity and private debt are projected to be among the best-performing alternative asset classes over the next decade, with infrastructure and specific real estate sectors (e.g., data centers, logistics) also expected to offer attractive returns driven by megatrends like AI and the energy transition.
However, returns are generally expected to moderate compared to the post-pandemic surge, and careful sub-sector selection will be crucial.
1. Current Market Performance and Post-2020 Highlights
1.1 Overall Alternative Investments Market Trends
The alternative investments market has demonstrated significant growth and evolution since 2020. The period was initially marked by sharp declines due to the COVID-19 pandemic, followed by a strong recovery fueled by monetary and fiscal stimulus.
Real Estate Performance
1.2 Best Performing Alternative Investments Post-2020
Identifying the best performing alternative investments post-2020 requires looking at specific segments within broader asset classes. In real estate, U.S. housing prices surged, with a nearly 50% total return in the four years leading to early 2024, significantly outperforming previous decades.
“Tech-linked REIT sectors (infrastructure, data centers, industrial) thrived due to increased demand from the digital economy, while others like lodging and retail initially suffered.”
1.3 Performance of Key Alternative Asset Classes
The performance of key alternative asset classes since 2020 has been characterized by significant divergence and volatility, reflecting the unique impacts of the pandemic, subsequent economic recovery, and shifting macroeconomic landscapes.
Private Equity and Venture Capital
While specific post-2020 performance data for private equity and venture capital is not detailed in the provided snippets, the broader market context suggests a dynamic period. The low-interest-rate environment in the early post-2020 years likely supported valuations and deal activity.
Real Estate
The real estate market, particularly Real Estate Investment Trusts (REITs), experienced significant volatility and sector-specific impacts post-2020. The initial COVID-19 shock led to sharp declines, with the FTSE Nareit All Equity REITs index dropping 41.9% from its February 2020 peak by mid- to late-March 2020.
Key Insight: The S&P 500 Real Estate Index gained 12.4% in 2023 after a loss in 2022, showing recovery momentum.
Source: StatistaCommodities
Commodities exhibited mixed and volatile performance post-2020. The Bloomberg Commodity Index (EUR) showed a 20-year CAGR of -0.05% up to 2024 but delivered an average annualized return of 12.2% over the five years leading to 2024.
2. Predicted Future Performance (Next 10 Years)
2.1 Overall Growth and Market Dynamics
The global alternative investments market is poised for substantial growth over the next decade. Preqin forecasts that the global alternatives industry will reach $29.2 trillion in Assets Under Management (AUM) by 2029, a significant increase from $16.8 trillion at the end of 2023.
Growth Trajectory: This trajectory suggests the market will exceed $30 trillion by 2030, representing an annualized growth rate of 9.7% between 2023 and 2029.
Source: Globe Newswire2.2 Return Projections for Key Alternative Asset Classes
| Asset Class | Projected 10-Year Return | Projected AUM by 2029/2030 | Key Drivers |
|---|---|---|---|
| Private Equity | 13.4% IRR | $12.0 trillion | Moderation from 15.5%; supported by private wealth |
| Private Debt | 12.0% IRR | $2.6 trillion | Improvement from 8.1%; distressed debt at 13.4% |
| Real Estate (Value-Added) | 9.6% IRR | $2.7 trillion | Largest performance improvement (+2.1pp) |
| Infrastructure | N/A (AUM growth focus) | $2.4 trillion | Driven by global energy transition |
| Commodities (ex-Ag/Lvst) | 4.2% Annualized | N/A | Moderate outlook |
Table 1: Predicted Future Performance of Key Alternative Asset Classes (Next 10 Years)
2.3 Risk-Adjusted Return Considerations
Incorporating alternative investments into a portfolio can significantly impact risk-adjusted returns. An analysis by the Georgetown Center for Retirement Initiatives, focusing on target-date funds, illustrates this.
Baseline Portfolio
With Alternatives
3. Insights from Major Asset Managers and Industry Reports
3.1 BlackRock’s Perspective
BlackRock is making significant strategic moves to expand its presence in alternative investments, signaling strong conviction in their long-term growth. The firm aims to raise $400 billion in private market funds cumulatively between 2025 and 2030.
Strategic Acquisitions: This ambition is supported by major acquisitions, including Global Infrastructure Partners (GIP), with approximately $170 billion in AUM, and private credit manager HPS Investment Partners, managing around $157 billion.
Source: AI-CIO3.2 Vanguard’s Outlook
Vanguard offers a more cautious but still positive outlook on specific alternative asset classes, notably private equity. Their analysis projects a 10-year annualized return of 8.9% for private equity, compared to 5.4% for global public equity.
“This implies an expected illiquidity premium of approximately 350 basis points for private equity over public equities.”
3.3 McKinsey & Company Analysis
McKinsey & Company’s research highlights several transformative trends in the financial markets, with significant implications for alternative investments. A key area is asset tokenization, which McKinsey projects could reach a total market capitalization of nearly $2 trillion by 2030.
Tokenization Impact: For alternative funds, tokenization is expected to contribute around $0.2 trillion to market capitalization, and other alternative assets another $0.1 trillion, driven by streamlined distribution and the creation of more liquid secondary markets.
Source: McKinsey on Investing3.4 Preqin Projections
Preqin, a leading data provider for alternative assets, forecasts robust growth for the global alternatives industry. Their “Future of Alternatives 2029” report projects that the market will grow from $16.8 trillion in AUM at the end of 2023 to $29.2 trillion by 2029, an annualized growth rate of 9.7%.
Fastest Growing Segment
Secondaries Market Annual Growth
Private Equity AUM
Projected by 2029
4. Global Market Perspective
4.1 Regional Performance Variances
The provided information highlights some regional performance variances, particularly in real estate. U.S. housing prices have shown remarkable strength, increasing by nearly 50% in total in the four years leading to early 2024.
Global Data Center Growth: U.S. development is growing around 25% per year, with similar growth (15-35% annually) observed in Asia, Europe, and Latin America.
Source: J.P. Morgan Private Bank4.2 Global AUM Growth and Investor Sentiment
Global Assets Under Management (AUM) for alternative investments are projected for substantial growth, with Preqin forecasting an increase from $16.8 trillion at the end of 2023 to $29.2 trillion by 2029, and potentially exceeding $30 trillion by 2030.
“BlackRock’s observation that 70% of wealth investors intend to allocate between 5-20% of their portfolios to private markets over the next five years further underscores this positive sentiment.”
5. Conclusion and Investment Considerations
5.1 Summary of Best Predicted Performers
Based on the projections and analyses from major institutions, several alternative asset classes and strategies are highlighted as potentially strong performers over the next decade.
Private Equity
Projected IRR (Preqin)
Private Debt
Projected IRR (Preqin)
Real Estate Value-Add
Projected IRR (Preqin)
Infrastructure
Projected AUM by 2029
5.2 Key Risks and Challenges in Alternative Investments
Investing in alternative assets is not without significant risks and challenges. Illiquidity is a primary concern for many alternative investments, particularly in private equity, private debt, and direct real estate, which can make it difficult to access capital quickly.
Risk Factors: Higher fees, complexity, valuation challenges, wider dispersion of returns, and macroeconomic uncertainty all pose ongoing risks that investors must monitor.
5.3 Strategic Allocation to Alternatives in a Diversified Portfolio
A strategic allocation to alternative investments can play a valuable role in a diversified portfolio, primarily by offering the potential for enhanced returns, improved risk-adjusted performance through lower correlation to traditional assets, and better downside protection.
“The key is to determine an appropriate allocation level based on individual risk tolerance, investment horizon, and liquidity needs. A well-considered allocation, focusing on diversification across different alternative strategies and careful manager selection, is crucial to harnessing the potential benefits while mitigating the inherent risks.”
Nathan has worked in financial services and strategic financial and investment growth for over 30 years. He was the founder and COO of a Queen’s Award-winning financial services company based in the UK, and a capital investment company specializing in oil and gas investments, based in Virginia, USA.
He served as a financial and investment advisor to delegates of the UN, World Health Organization, and senior executives of Fortune 500 companies in Geneva, Switzerland, following the 2008 financial crash.
Today, he specializes in alternative investments, researching niche asset classes, publishing investor-focused insights, and supporting capital-raising efforts for select investment providers through strategic content and market positioning.
You can read his full bio on our about us page