Conditions for global private markets were decidedly mixed in 2024. Dealmaking remained tepid, for instance, while fundraising across all asset classes fell to its lowest level since 2016, even as the performance of public markets increased. Yet capital deployment increased by double digits across asset classes, as managers adapted to a world of interest rates structurally higher than in previous years. Investor interest and confidence in private markets remained strong. In McKinsey’s latest survey of the world’s leading limited partners (LPs), investors say that they will allocate more capital, not less, to private markets over the coming year.
Conditions are likely to remain uneven for private markets. At the time of this report’s publication, geopolitical instability and changes in trade policy are emerging as critical challenges for managers and investors. Meanwhile, innovation in technology, particularly the rapid advancement of generative AI (gen AI), has compelled leaders in private markets to build new capabilities in their quest to find more value.
What struck us most when writing this report, however, is the resilience shown by private market stakeholders as they navigate an industry in transition. Fundraisers are looking beyond closed-end channels to raise capital in new vehicles, such as evergreen funds. Dealmakers and operators are moving from traditional financial engineering to focus on sustained operational transformation. And LPs are moving from being passive allocators to investing in general partners (GPs) themselves (as thriving secondaries and GP stakes markets reveal).
Below is a summary of how each asset class fared last year. McKinsey’s 2025 global private markets report can be downloaded in full here. An executive summary of the report, focused on private equity, was previously published in February.
Private equity emerging from the fog
To the casual observer, 2024 may have felt like yet another difficult year for private equity (PE) globally. Fundraising remained tough—down 24 percent year over year for traditional commingled vehicles, marking the third consecutive year of decline. Investment returns were muted, especially compared with buoyant public markets.
Our analysis reveals a more nuanced picture. After two years of murky conditions, private equity started to emerge from the fog in 2024.
For one, the long-awaited uptick in distributions finally arrived. For the first time since 2015, sponsors’ distributions to LPs exceeded capital contributions (and were the third-highest on record).1 This increase in distributions arrived at an important time for LPs: In our 2025 proprietary survey2 of the world’s leading LPs, 2.5 times as many LPs ranked distributions to paid-in capital (DPI) as a “most critical” performance metric, compared with three years ago. There was also a rebound in dealmaking after two years of decline, with a notable increase in the value and number of large PE deals (above $500 million in enterprise value). Exit activity, in terms of value, started to whir again as well, especially sponsor-to-sponsor exits (Exhibit 1).
This resurgence was powered by a much more benign financing environment. The cost of financing a buyout declined (even though it remains much higher than the ten-year average), and new-issue loan value for PE-backed borrowers almost doubled. In a sign of sponsors’ confidence amid improving financing conditions (spurred by monetary easing), entry multiples increased after declining in 2023, as sponsors could sell more companies at a higher average price per company.
The contrast between the past three years and the prior period could not have been starker. The rapid run-up in global interest rates from 2022 to 2023 (an increase of more than 500 basis points in the United States) shook private equity to the core, an industry that had acclimated to cheap leverage for nearly a decade. There was a raft of other macroeconomic challenges too, including persistent inflation and increased geopolitical uncertainty. These and other headwinds prompted a slump in dealmaking while creating unanticipated disruptions in portfolio companies. They also complicated managers’ ability to determine the true earnings of target companies, especially those purchased at lofty valuations in the aftermath of the COVID-19 pandemic. Even investors with near-term liquidity requirements—and conviction in the long-term value of potential acquisitions—struggled to execute deals in a cautious lending environment.
But private equity is now starting to surface from these challenges—likely more resilient and durable than before. In our LP survey, 30 percent of respondents said they plan to increase their private equity allocations in the next 12 months. Beyond offering LPs diversification, the continued appeal of the asset class can also be explained by its long-term performance trajectory. Since the turn of the millennium, private equity has outpaced the S&P 500—rewarding those investors who can stomach the relatively lower liquidity that typically characterizes private equity investments.
GPs, too, are evolving and innovating. In 2024, total global PE assets under management (AUM) appeared to decline3 by 1.4 percent by the traditional measure of closed-end commingled funds. Yet this drop does not capture the novel ways in which GPs are unlocking alternative sources of capital, such as from separately managed accounts, co-investments, and partnerships. These alternative forms of capital have provided a multitrillion-dollar boost to global private equity AUM. GPs are also increasingly sourcing new funds from noninstitutional investors, such as high-net-worth individuals. They do this through multiple channels (such as aggregators and wealth managers) and with multiple vehicles (such as open-end and semi-open-end funds)—all of which are more accessible than traditional closed-end vehicles to retail and high-net-worth investors.
To address growing liquidity demands from LPs, an increasing number of GPs are creating new fund structures, including setting up continuation vehicles. And they are increasingly expanding their use of deal structures, such as public-to-private (P2P) transactions and carve-outs, to accelerate deployment. In Europe, where P2P activity has historically been subdued, the total value of P2Ps was up 65 percent in 2024.
Meanwhile, scale continues to provide a competitive advantage to managers: Over the past five years, the top 100 GPs made approximately three times more acquisitions of competing GPs than they did in the previous five years. This scale could provide GPs with more flexibility and help them diversify income streams; however, its correlation with performance or fundraising is unclear (smaller, midmarket funds proved easier to raise in 2024 than the largest funds).
Of course, the fog hasn’t entirely cleared: There were some industry pockets that continued to face rough weather. Venture capital (VC) recorded a bigger decline in deal count and lower growth in deal value than other private equity sub-asset classes globally. Across asset classes, Asia lagged behind North America and Europe year over year in fundraising (driven principally by a retreat from China), performance, and deal activity. As the fog lifts, we can more clearly see those in peril—even within better-performing asset classes such as buyouts. Some funds are facing twin pressures of elevated marks and the inability to sell their portfolio companies. Over time, the spread between better-differentiated and better-performing funds and less-differentiated and worse-performing funds may widen.
The PE industry will also need to monitor and address other challenges. It is uncertain, for now, whether or for how long the hangover from the exuberant dealmaking of 2021 and 2022 will last. The exit backlog of sponsor-owned companies is bigger in value, count, and as a share of total portfolio companies than at any point in the past two decades. Selling these assets, especially when the marks are likely to remain elevated on many sponsors’ books (given high entry multiples in 2021 and the increasing role of GP-led secondaries, which often bring exits below marks), will require more than just high hopes that the market will turn. Refinancing those portfolio companies in an uncertain, higher-rate, and more discerning lending environment will also be challenging.
Meanwhile, investors and operators need to consider increasing geopolitical uncertainty—for example, the threat of tariffs—as they underwrite and drive value creation initiatives. All stakeholders must also confront rapid evolutions in AI. What is top of mind for the investors and operators we work with is building best-in-class data science teams within fund operations, developing AI-enabled value creation initiatives that can drive portfolio-wide impact, and scaling external AI partnerships.
Real estate reaches for daylight
The real estate industry charted an uneven path to recovery in 2024. Some strategies and sectors found stability, while others continued to face substantial headwinds.
On the plus side, global real estate deal value grew in 2024 for the first time in three years, rising 11 percent to $707 billion, from $634 billion in 2023. The partial rebound was driven by rate cuts that created a more favorable financing environment, compression in capitalization (cap) rates, and reduced supply in sectors such as multifamily and industrial (Exhibit 2). Additionally, asset values may now be stabilizing as investors improve their risk assessment of the asset class.
However, fundraising woes continued throughout the year. Global closed-end fundraising declined by 28 percent to $104 billion, the lowest annual total since 2012. The decline in fundraising varied across Asia–Pacific, Europe, and the United States. Debt fundraising declined the most, by 44 percent year over year—though much of the capital raised for debt strategy is being channeled through broader special-situation and opportunistic vehicles instead of dedicated debt funds. According to our analysis, opportunistic fundraising declined by 31.5 percent to $37 billion, though the data may be skewed by fund timing—fundraising in 2023 included the largest fund ever raised, an opportunistic vehicle four times the size of 2024’s largest fund (Exhibit 3). And while net flows from open-end core funds continued to be negative, they grew marginally to –$12.0 billion in 2024, up from –$12.6 billion in 2023, as investors rotated toward higher-return strategies.
LPs maneuvered through mixed real estate performance. Returns for closed-end real estate funds remained negative, with a pooled IRR of –1.1 percent through the third quarter of 2024. Open-end funds were also under pressure: NFI-OE4 funds recorded a gross return of –1.6 percent in 2024, registering their second annual decline since the 2008 global financial crisis.
In other areas, performance improved. The NCREIF Property Index, which measures property-level returns, saw positive property-level unlevered total returns in 2024, driven by a rebound in appreciation and stronger income returns. Alternative sectors also posted robust returns, with manufactured housing and senior housing generating total returns of 11.7 percent and 5.6 percent, respectively, in 2024. Meanwhile, data centers, which have become real estate’s most sought-after sector, delivered 11.2 percent returns. GPs that have the operational expertise or partnerships to manage access to power, tenant relationships with hyperscalers, and zoning constraints were able to raise capital for data centers at scale.
As GPs look for ways to increase net operating income in the current environment, those investors with operational capabilities and expertise are taking market share from capital allocators. GPs with operational capabilities accounted for 37 percent of real estate assets under management in 2023, up about 11 percentage points over the past decade. For their part, some leading capital allocators are starting to harness the power of analytics and actively managing their operator partners to enhance their service delivery and ensure consistent alpha generation.
Private debt remains steady in the crosswinds
Private debt, once again, proved to be a resilient asset class in 2024. Private new-issue financing for leveraged buyouts (LBOs) increased in Europe and the United States in 2024, fueled by robust transaction activity in private equity buyouts amid a more benign borrowing environment compared with prior years. And although global private debt fundraising decreased by 22 percent to $166 billion, the rate of decline was lower compared with other private market asset classes—and was largely driven by the mezzanine substrategy (Exhibit 4).
Private debt is going through a period of evolution. For many years, growth in the asset class, particularly in the direct lending strategy, was driven by banks’ retreat from leveraged lending. In 2024, banks’ and syndicated lenders’ share of total financing increased—with more willingness from banks to take on risk. Average spreads in direct lending, the largest private debt substrategy, compressed by approximately 120 basis points to settle at about 550 basis points over base rates. While direct lending continued to lead new-issue LBO financing in terms of deal value and count, its share of global private debt deal value declined year over year (Exhibit 5).
Amid these shifts, investor interest in private debt remains strong. In uncertain market conditions, the security derived from debt’s privileged position in the capital structure has appealed to institutional investors, as well as retail and insurance capital pools that continued to flow into private debt strategies in 2024. Further, investors expect the private credit ecosystem to continue expanding as more asset classes transition to nonbank lenders.
New opportunities are also emerging for managers. More than $620 billion in high-yield bonds and leveraged loans, for example, are set to approach maturity in 2026 to 2027, which could create refinancing opportunities and spur greater demand for private credit solutions.5 To position themselves well for the future, managers should remain disciplined in their underwriting, build capabilities in new asset classes, tap alternative capital sources, and translate geopolitical risks into credit opportunities.
In this report, we focus on direct lending and adjacent strategies (for example, special situations and mezzanine, distressed, and venture debt), excluding segments such as public or quasi-public credit, structured credit products, balance sheet lending by regulated institutions, and fund-level or sponsor financing.
Infrastructure poised for clearer conditions
From one perspective, 2024 may have seemed like a tougher year than 2023 was for infrastructure leaders. Fundraising was down again, falling 15 percent year over year to reach its lowest amount in a decade (Exhibit 6). GPs spent more time on the fundraising trail compared with the prior year. And the capital-raising environment appeared less welcoming to newcomers than ever before.
However, there are several reasons to believe that the asset class is inching closer to a full recovery. Capital deployment accelerated in 2024. Deal value increased by 18 percent over the prior year, making 2024 the second-highest year on record (behind 2022). Several infrastructure subsectors recorded robust deal activity (Exhibit 7). Our analysis suggests that dealmakers also executed bigger deals, since deal counts increased only 7 percent over 2023. This active deployment resulted in dry powder decreasing to $418 billion as of the first half of 2024, which was 10 percent lower than at the end of 2023.
Infrastructure also appears to be the asset class in which the greatest number of investors want to increase allocations in the next 12 months (selected by 46 percent of the total respondents), according to the McKinsey LP Survey.6 There are several reasons for this bullish view. Global trade, which grew to nearly $33 trillion in 2024,7 has spurred major public and private investments in ports, rail, and logistic infrastructure. The global energy transition continues to require trillions of dollars’ worth of investment into infrastructure: McKinsey’s research shows that the total of new physical assets for clean energy and enabling infrastructure could reach approximately $6.5 trillion per year by 2050.8
Then there are demographic shifts: growth in population (expected to increase by nearly two billion in the next 30 years) and wealth ($160 trillion in wealth created in the past two decades),9 which will likely boost demand for infrastructure, especially critical sectors such as roads and energy. At the same time, demand for power is also rising. In the United States, for instance, retail sales of electricity increased by 2 percent in 2024 from a year prior, after 15 years of near-flat growth, due in large part to growing electricity needs of data centers (with the power demand being accelerated by the use of AI and cloud computing).10
To capitalize on these opportunities in the current market environment, infrastructure managers are also changing how they invest—and generate returns. In previous years, infrastructure GPs tended to invest in distinct infrastructure verticals. Now we observe heightened investment at the intersection of different themes (energy and digital for data centers being a notable example). At the same time, greater competition for assets and the end of an extended period of “cheap money” is making active ownership increasingly important—if not essential—to drive returns. Value-oriented infrastructure GPs that are willing to focus on and underwrite value creation initiatives could gain strong competitive differentiation, given the sustained LP interest in committing to the strategy.
