In the Spotlight Trend of the Month
While headlines paint a picture of economic and financial market uncertainty, there’s a powerful trend unfolding within the capital markets today and that’s the growth of the alternative investment industry.
In recent years, asset classes such as private equity (PE), private credit, hedge funds, and infrastructure have boomed, fuelled by investor demand for new sources of return and investments that are uncorrelated to traditional assets such as stocks and bonds. Once a niche area of the markets, alternatives are fast becoming a cornerstone of investor portfolios. And this is creating immense opportunities for alternative investment firms and their investors alike.
In recent years, firms such as Blackstone, Apollo Global Management, and KKR have undergone a profound evolution, morphing from specialised alternative asset managers into expansive, multi-strategy investment powerhouses.
Today, these companies manage hundreds of billions in assets, covering everything from venture capital and private equity to real estate and infrastructure.
This transformation is not just about size — it’s about access and influence in a fast-changing world.
As traditional banks pull back from lending, these companies are stepping in to become major providers of private capital, playing an increasingly central role in financing businesses and projects that might otherwise struggle to access capital.
Looking ahead, the backdrop for these types of companies looks favourable due to several key trends.
For a start, demand for private equity and other alternative investments is expected to continue rising as investors allocate more capital to these asset classes. Over the last decade, high-net-worth (HNW) investors (those with more than $5 million in investable assets) have been upping their exposure to alternatives significantly. According to KKR, HNW investors, on average, had nearly 10% of their portfolios in alternatives in 2024 versus 7.7% in 2020. Meanwhile, retail investors are now getting involved thanks to new innovative products and platforms that are facilitating access to the asset class. According to a recent report by investor services company Apex Group, 86% of private equity firms expect alternative investments to dominate retail portfolios within the next five years. It’s worth noting here that in May, US President Donald Trump said that he is considering an executive order to allow private equity investments in US retirement portfolios. There’s no guarantee that this executive order will go ahead. If it did, however, it could push trillions of dollars into the asset class.
Secondly, lower interest rates — which are a possibility in the not-too-distant future — should provide a supportive environment for businesses within the industry. Once rate cuts begin, we can expect to see a substantial increase in acquisitions, since lower financing costs will make deals more attractive. Lower interest rates should also lead to an increase in "realisations" in private equity. Realisations, or exits, refer to the process by which PE firms sell their portfolio companies to return capital to their investors, and they tend to lead to higher fees for the firms involved.
It’s worth noting that in April and May, the private equity industry saw a flurry of activity despite the fact that interest rates were relatively high. Blackstone, for example, announced a deal to take TaskUs — a leading provider of outsourced digital services — private at $16.50 per share. The aim is to enable TaskUs to make long-term investments to better support its clients as it scales and adapts in the AI age. Turning to KKR, it signed a $3.1 billion deal to acquire OSTTRA — a leading provider of post-trade solutions for the global OTC market — from CME Group and S&P Global. As for Apollo, it led a $4 billion private credit facility backing Thoma Bravo’s $10.6 billion acquisition of Boeing’s Digital Aviation Solutions division, showing its dominance in large-scale private lending.
These deals highlight how PE giants are placing strategic bets across a range of industries — often in areas underserved by public markets or traditional banks.
One other factor that is worth mentioning is geopolitics. President Trump's recent imposition of a 10% baseline tariff on all imports, with higher rates for specific countries, has reignited concerns about a potential trade war. However, while many investors fear inflationary pressures and disruptions to supply chains, private equity firms are seeing an opportunity. These firms thrive on volatility, dislocation, and complexity, and have the capital flexibility to pivot quickly.
Ultimately, private equity and alternatives are no longer supporting acts in the financial markets. Today, they’re influencing how capital moves, where returns are generated, and what the future of investing is going to look like. The good news for retail investors is that many private equity firms are publicly traded, meaning that it’s very easy to obtain access to the industry. Those interested in gaining portfolio exposure to this exciting area of the financial markets may wish to check out eToro’s Private-Equity Smart Portfolio. This provides access to a range of leading private equity businesses including Blackstone, Apollo, and KKR.
