BCG predicts boom in private capital income by 2026

Boston Consulting Group (BCG), a global management consulting firm, has predicted that revenues from alternative assets such as private equity, hedge funds and real estate assets will reach more than half of global revenues over the next five years. years.

That’s according to the 20th edition of BCG’s annual asset industry study, “Global Asset Management 2022: From Tailwinds to Turbulence.”

“Emerging trends that are expected to shape the future include an increasing shift of portfolios towards alternative assets in pursuit of higher returns relative to publicly traded markets.

“Alternative products accounted for more than 40% of total asset management revenues in 2021, despite representing less than 20% of global assets under management. This trend is expected to continue over the next five years, with alternative revenues expected to reach more than half of all global industry revenues by 2026.
“Over the next five years, we expect alternative revenues to reach more than half of all global revenues, driven in large part by the fees that alternative assets command,” the report said.
Additionally, with $100 trillion to $150 trillion in capital deployment to achieve net zero goals by 2050, the demand for sustainable investments represents an opportunity that will dominate the sector in the short and long term.
Around $20 trillion to $30 trillion is expected in bond and equity allocations for asset managers, much of which will be preloaded over the next few years as more investment flows into projects of climate transition.
Stefano Niavas, Partner and Managing Director of BCG Nigeria, said: “The African economy continues to be attractive to private equity investors seeking huge returns and Nigeria tops the list of countries that have seen an influx of remarkable private capital in 2021.
“A larger share of these funds went into venture capital assets, followed by infrastructure, then private equity. About 145 venture capital deals were reported in Nigeria in 2021, with a total value of $1.1 billion, according to the African Private Equity & Venture Capital Association (AVCA).
He said “this is a wake-up call for asset fund managers to capitalize on this trend and position themselves for a quick win in this dynamic asset management industry. , because alternative products promise better performance”.
Additionally, Chris McIntyre, Managing Director and Partner at BCG, co-author of the report, said: “The incredible market run that has fueled the performance of the asset management industry over the past 15 years and more was a double-edged sword. .
“On the one hand, this has provided strong tailwinds to the sector, but it has also challenged innovation, allowing the market to be dominated by legacy products that benefit from the compounding effect of the returns of the underlying assets. There are signs that these trends are starting to change, and the ensuing turbulence is an opportunity as well as a challenge for industry players.

Sallie R. Loera