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Where to focus in private markets

Where to focus in private markets

by Mathieu Forcioli, Global and Asia Head of Alternatives, HSBC Global Private Banking and Wealth

  • The momentum around private equity remains in place in 2025, with operational value creation an important driver of returns. Manager selection remains critical. Secondary private equity investments will be an essential component of portfolio allocation strategies in 2025
  • In private credit, direct lending continues to show healthy risk / return metrics. In addition, we look for opportunities in underpenetrated areas such as asset-based lending, structured credit solutions and niche private debt strategies
  • While healthcare, technology, and renewable energy are expected to emerge as key sectors of focus for investors, we expect further growth in direct infrastructure and real estate investments. Data centres are benefiting from surging demand for AI and cloud computing. Additionally, healthcare facilities, storage properties, and multifamily housing are becoming increasingly attractive investment opportunities

Returns for private equity were in line with historical averages in 2024 amid signs of a recovery in dealmaking, driven by a clearer direction on interest rates and more supportive capital markets. The momentum is expected to continue throughout 2025, pointing to an even stronger private equity environment as the easing of interest rates globally adds to the attractive risk-reward profile of private equity. This said, manager selection remains critical, with the performance gap between top-quartile and bottom-quartile managers remaining wide. Operational value creation will be a primary driver of returns, as technology adoption, efficiency improvements and strategic growth initiatives enhance the value of the portfolio companies of private equity firms. We expect healthcare, technology and renewable energy to emerge as key sectors of focus for private equity investors.

The growing secondary private equity market is expected to deepen liquidity for private equity funds and provide new entry points for individual investors, offering access to mature assets at attractive valuations. Thus, we expect secondary private equity investments to become an even more essential component of portfolio allocation strategies in 2025.

Private credit will continue to attract significant capital inflows as investors seek alternatives to public debt markets. With the upper end of the direct lending segment becoming increasingly competitive, investors could look for opportunities in underpenetrated areas such as asset-based lending, structured credit solutions and niche private debt strategies.

Direct infrastructure investment has gained substantial traction in recent years and is projected to maintain a 13 per cent-15 per cent annual growth trajectory over the next 10 years, with the long-term structural drivers being decarbonisation, supply chain reshoring, and digital transformation. By allocating to direct infrastructure, investors gain exposure to essential assets that generate stable, often inflation-linked cash flows.

The global real estate market entered a recovery phase in 2024, with transaction volumes and values stabilising. In 2025, lower interest rates are expected to bridge the pricing gap between buyers and sellers, improving liquidity and fostering investment activity. Managers with the ability to navigate the real estate sector and deploy capital strategically should be well-positioned to generate strong risk-adjusted returns in the coming year.

Beyond traditional property, alternative real estate investments are gaining attention. Data centres are benefiting from surging demand for digital infrastructure driven by AI and cloud computing. Additionally, healthcare facilities, storage properties and multifamily housing are becoming increasingly attractive investment opportunities.

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