The Time for Private Capital

The Time for Private Capital: Alternative Assets Becoming the Favorite for Diversifying Investor Portfolios

Alternative Assets: A Hedge Against Uncertainty

The alternative assets sector has seen impressive growth in recent years, becoming a key player in modern investment strategies. Assets under management (AUM) have reached record levels, reflecting the growing interest from both investors and fund managers. Preqin forecasts that the global alternatives industry will expand to $29.2 trillion in AUM by 2029, up from $16.8 trillion at the close of 2023.

However, in 2024, private markets continued to experience the effects of macroeconomic headwinds: low distribution rates, a shrinking pool of active investors, and a sluggish exit market. Many general partners (GPs) took a more cautious approach to deploying capital, focusing on opportunities with solid traction and a path to profitability.

In a recent Bain Capital survey of nearly 300 private capital professionals (Private Capital Predictions for 2025), 72% expect higher deal volumes in 2025 compared to 2024 and are doubling down on deal sourcing efforts. This optimism appears rooted in three primary factors:

For a start, inflation has moderated, and valuations have begun to adjust. We saw the Fed cut rates in September and November, and private markets continue to sit on high levels of dry powder, $880bn for growth equity and venture capital investors as of November 2024.

Trends Shaping Private Equity and Venture Capital

The past few years have been tough for Europe’s Private Equity and Venture Capital scene. Last year, European VCs raised c.$27.1bn, significantly less than the $41.8bn raised in 2022. This year, they’ve raised $30.4bn so far. Might 2025 bring easier conditions?

At Cardumen Capital, we believe three major trends will continue to favor investment in Private Equity and Venture Capital during the following years:

1. Easing Monetary Policy

‍Since 2022, the favorable macroeconomic environment of low interest rates shifted, with a 2024 characterized by record-high interest rates, political uncertainty, and concerns over economic slowdown. This led many investors to allocate resources to money market funds offering liquidity and competitive yields. According to Reuters, investors funneled a record $600 billion into global bond funds in 2024, driven by decades-high yields. 

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Now, with interest rates beginning to decline, leading American banks and international experts anticipate further easing in the near future. This trend is expected to support economic expansion in both the United States and the Eurozone, stimulating growth and favoring alternative investments. 

2. Record Capital Injections

We observe capital investment injecting three major global trends:

• Artificial Intelligence: Investments in generative AI are transforming industries like healthcare and finance, creating unprecedented opportunities for growth.
• Energy Infrastructure: Renewable energy projects remain critical as governments strive for carbon neutrality and decarbonization by 2050. On the other hand, the implementation of AI at a global level will require new energy initiatives to support it. 
• Security: Investments in cybersecurity and dual-use technologies are gaining momentum considering rising cross-border instability.

Sovereign wealth funds are allocating record amounts to critical industries to bolster global competitiveness. According to the 2024 ICEX report, assets under management (AUM) by sovereign wealth funds have risen by 14% over the past year. 

3. Geopolitical Tensions

The post-pandemic era and geopolitical rivalries have accelerated reshoring and strategic offshoring agendas. Governments are implementing policies to control supply chains, foster domestic innovation, create high-paying jobs, and secure a share of new markets. Over the next decade, the European Union, the United States, and China are expected to allocate nearly $1 trillion annually in public funding to drive innovation and adopt transition technologies.

Practical Steps for Investors

• Build strong relationships with fund managers to access top-performing funds.
• Explore co-investment opportunities to participate in high-profile deals.
• Leverage secondary market platforms for liquidity and diversification.

Conclusion

In today’s fragmented geopolitical context, investment strategies require high rigor upon selection and agility. AI and sustainable investments will continue to gain importance over the next decade, but geopolitics, economic growth, and jobs will dominate the political agenda.

As Private Capital evolves, the next decade will bring new challenges, from integrating AI-driven analytics into deal-making to navigating stricter ESG regulations. 

At Cardumen Capital, we are committed to leveraging our expertise to navigate these trends, ensuring our investors capitalize on opportunities while mitigating risks. Expanding into new verticals adds value, reduces risk, and strengthens our position as a forward-thinking venture capital firm.