Infrastructure emerged as the top-performing alternative asset class over the past three years, delivering a return of 37.2% between Q3 2021 and Q3 2024, according to data provider Preqin.
The Preqin report compared private asset classes with their public market counterparts, offering insights into future return prospects.
Private debt also continued to outperform equity strategies, generating a 6.3% return for investors in 2024 to Q3, following a 9.4% return in 2023. However, according to the report, direct lending may be showing signs of moderation.
Angela Lai, the report’s lead author and head of performance and valuations, research insights, Preqin, noted that investors may seek yield by shifting to riskier segments such as mezzanine debt, which was the top-performing sub-strategy over the past year, returning 11.1% as of Q3 2024.
Meanwhile, private equity struggled to keep pace with public equities. Preqin’s Private Equity Index (excluding venture capital) showed a return of 3.6% in 2024 to Q3, adding to a 7.1% return in 2023. In contrast, the S&P 500 delivered higher returns of 22.1% and 26.3% over the same periods, highlighting the ongoing challenges faced by private equity investors.
Venture capital valuations have remained under pressure since 2022, with down rounds affecting one in five companies raising new capital in Q3 2024. According to Preqin, this marked one of the highest levels of down rounds in recent years, underscoring the difficulties venture-backed firms face in maintaining their valuations.
Lai commented: “For two years now, private capital performance has lacked luster, not only compared with public markets but also in relation to investors’ target returns. On an annualised basis, only private debt performance was firmly within investors’ target range of returns, which are clustered around 8–12%. On the other extreme, venture capital investors would be the most disappointed; they typically target more than 20%, but venture funds have been on a three-year losing streak. We believe that the slowdown in exit activity is a key reason for the underperformance vis-à-vis public markets for both private equity and venture capital.”
