Private markets are on track to surpass traditional investment strategies in revenue by 2027, with private equity, credit and real assets driving growth, according to Morningstar’s data.
Private equity currently makes up 39% of private markets, as consolidation allows leading players to scale and access new opportunities. Meanwhile, private credit is expanding rapidly due to tighter banking regulations, which are limiting traditional lending and increasing demand for alternative financing solutions. This shift is fueling broader acceptance of private credit across the market, according to the report.
Sustainability initiatives and digital transformation are also boosting real estate, infrastructure and renewable energy investments. The report pointed to a surge in demand for data centres as a key driver of this trend. The secondaries market is also evolving, enhancing liquidity and efficiency by enabling more active trading of private assets.
European asset managers face a major opportunity in under-allocated household wealth. Large cash holdings and low exposure to growth assets present long-term pension risks, but they also open the door for asset managers to engage new investors, shared the data provider.
Railpen’s green investment focus
The industry is experiencing rapid consolidation, with deals like BNP Paribas’ acquisition of Axa Investment reshaping the competitive landscape. However, the report warned that mergers focused solely on scale often fail to deliver expected synergies.
European megafunds are gaining prominence, backed by North American investors and competitive management fees. This concentration is streamlining investor due diligence, as firms with comprehensive strategies and strong track records attract increasing capital.
The need to refinance €160 billion in leveraged loans over the next four years presents both a challenge and an opportunity for private equity and credit, according to Morningstar. While lower interest rates could ease refinancing pressure, economic stress may shift the narrative.
Private equity continues to outperform traditional investment, benefiting from diversified returns, proprietary deal access, and strong asset-owner relationships. Despite these advantages, Morningstar’s research found that only four of Europe’s top 40 fund managers—Schroders, M&G, Abrdn and Robeco—remain independent, with the rest controlled by banks, insurers, or international firms.
Johann Scholtz, senior equity analyst at Morningstar, commented: “The dynamics within Europe’s asset management industry are undergoing a profound shift. An increasing focus on private markets, coupled with the rising dominance of megafunds and the urgency to address pension shortfalls, creates opportunities for firms to strengthen their competitive positioning. Forward-looking players who act now are well-placed to capture untapped growth.”
