Are you harnessing the growth and resilience of private capital?

By Ryan Burke

Global EY Private Leader

Global leader helping companies grow and profit in this transformative age. Passionate about eradicating child illiteracy and raising neurodiversity awareness. Father of two.

9 minute read 21 Aug 2023

Private capital markets have been outperforming equities, offering investors opportunities with higher yields and portfolio diversification. 

In brief

  • An estimated US$22.6 trillion of capital is invested in private markets – a figure expected to continue rising despite recent headwinds.
  • Market growth has been driven by an increase in high-net-worth individuals (HNWIs), intergenerational wealth transfer, and companies staying or going private.
  • Private capital has shown great resilience in a volatile environment and presents tremendous opportunities for investors and entrepreneurs globally. 

In volatile times, investors seek growth and resilience, qualities that private capital markets have demonstrated in abundance in recent years. Made up of family offices, private equity (PE), hedge funds, venture capital (VC) and private debt, private capital provides a compelling alternative to public markets.

With the transfer of intergenerational wealth, a global trend towards delistings, and companies opting to stay private for longer, there are strong indications that private capital markets are set to rise further. This article looks at some of the key drivers of growth, and the prospects for this sector, touching on issues like performance, resilience, access to capital, and investment preferences.  

Young businesswoman working on a computer
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The rise and rise of private capital

Sustained growth and strong fundamentals

In the past decade, private markets have enjoyed a remarkable period of sustained growth, more than doubling from US$9.7 trillion in assets under management (AUM) in 2012, and are estimated to have reached $22.6 trillion AUM by the end of 2022.1

  • Open image description#Close image description

    A column graph depicting the growth of capital markets from 2012 to 2022 in trillions of US dollars. The size of each market component – Private debt/Other assets under management, hedge funds, private equity, venture capital and family offices are shown separately. Separate graphs can be selected for Global, Americas, EMEIA and Asia-Pacific numbers.

Several factors have driven this trend, including investors’ search for higher yields, increasing numbers of HNWIs with more investable wealth, and the largest intergenerational transfer of wealth in history.2 As private capital markets have become larger and more liquid, many successful companies have chosen to stay, or go, private. For many larger private companies, the option of staying private has also become more appealing. This is partly due to the reassurance of higher regulation standards in private company governance models. However, conditions in the public market have also played a part. These include increasing costs, and the daily, quarterly and annual public market disclosure requirements, which discourage companies from going and staying public. 

The 10-year picture also reveals that the performance of private markets has been consistently stronger and less volatile than that of public markets, especially since 2016.3

Across the globe, the number of delistings has shown a steady upward trend since 2012, with a particularly steep rise in the Americas and APAC. Even in EMEIA, where the volume of de-listings has fallen, this has been counterbalanced by a decline in IPOs, which significantly reduced the total number of listed companies. In the Americas, the number has barely changed since the start of the century, while many more large businesses have opted to go (or stay) private. In EMEIA, there are now 40% fewer publicly listed companies than in 2002. These broad trends demonstrate the rapid tilt towards private capital markets, where more diverse growth opportunities now exist across sectors.4

Of the various subsectors within the private capital market, venture capital (VC) has seen the largest annual growth since 2012. The US, for example, saw two record years in a row for venture investment in 2021-2022, where VC funds deployed US$336.9 billion and $212.2 billion respectively. Macroeconomic uncertainty and recession concerns have slowed VC investment in 2023, particularly in the US, but a high volume of fund formation and capital raised in recent years means investors have significant capital to invest, albeit more selectively. 

Areas such as generative artificial intelligence (AI) are providing strong interest from investors in 2023, despite a more challenging external environment. This positive investment sentiment on generative AI is matched by the leaders of private companies: The latest EY CEO Outlook Pulse (July 2023) has revealed that approximately two-thirds (62%) of private company CEOs believe AI will be a force for good and drive business efficiency.5

Beyond venture capital, PE firms are also well positioned to thrive, with close to US$1.2 trillion in capital at their disposal. Their diversified portfolios, which include new asset classes, and deep sector and functional expertise also provides advantageous positioning. 

Family offices continue to play an important role in the rise of private markets, and with a 27% share are the largest subsector, totalling US$6.1 trillion in AUM.7  In the decade between 2012 and 2022, family office AUM grew by an annual average of 7.5% – a figure expected to rise significantly up to 2027.8

Resilience in the face of volatility

All markets suffered the effects of a slowing global economy, high inflation and increased uncertainty in 2022. However, private markets proved remarkably resilient to these challenges, falling by just 3.5%. Global equities, on the other hand, experienced a double-digit drop in value, with both developed and developing markets undergoing sell-offs. Even traditional go-to assets in troubled times, such as US Treasuries, suffered, while alternative assets like cryptocurrency fell sharply.9

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    A line graph showing the growth of private market assets under management compared to public equity market capitalization growth from 2012 to 2022. While comparable earlier in the decade, the growth of private markets outstripped public equity markets from 2017 onwards.

Private market fundamentals remain strong, with several positive tailwinds, including increased capital allocation from institutional funds, and companies opting to stay private longer. There is also a sizeable pool of dry powder yet to be invested – around US$3.2 trillion (excluding hedge funds and family office capital).10  This investable capital has significant potential to multiply and generate much greater returns. 

After a quiet start to 2023, PE activity picked up over the first quarter, driven by large-scale take-privates (on the back of falling public market valuations), with more than US$62 billion in PE deals announced in March.11  In the first three months of the year, take-privates constituted around four-fifths of all PE deals – this figure is traditionally closer to one-fifth.12  EY Global Private Equity Leader Bridget Walsh has observed, “the rapid rise in take-private PE deals demonstrates the ability of PE firms to stay disciplined and spot opportunities to invest in high-quality assets that they believe are temporarily mispriced.”

As we enter the second half of 2023, there are signs that PE activity and interest are picking up as price discovery is rapidly taking place. 

With traditional sources of finance less freely available, private credit has stepped in as an alternative funding source for PE deals – via pools of actively managed capital that invest primarily in loans to private companies. 

The rapid rise in take-private PE deals demonstrates the ability of PE firms to stay disciplined and spot opportunities to invest in high-quality assets that they believe are temporarily mispriced.
Bridget Walsh
EY Global Private Equity Leader

PEs have also been heavily involved in carve-outs, transactions for which they are well suited, given their ability to detect and then deliver value that other types of investors may have missed.

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The future looks bright

Despite some headwinds, private capital markets are expected to thrive

Private capital growth is no short-term phenomenon. The dynamics that drove expansion in the last decade are likely to persist, with a significant market size increase expected over the next few years and PE and family office predicted to take a sizeable share of these assets.

In the near term, the sector may endure headwinds in the form of slower global growth, persistent inflation, rising interest rates, supply chain disruption, financial market volatility and geopolitical risks. VC funds, for example, are likely to become even more selective about how they deploy capital, focusing on entrepreneurs with sound economics and realistic growth trajectories.

As they plot a course for the rest of 2023 and beyond, entrepreneurs and private business owners will, therefore, need to carefully review business models and manage cash carefully. Although fundraising is set to continue, deals should be more investor-friendly and take longer to close compared to recent years.

The longer-term prospects for private markets remain promising and suggest tremendous opportunities for investors and entrepreneurs. The growth and resilience of private capital are of particular significance, given that private companies dominate the business base globally. Of companies that generate at least US$1 billion in revenue globally, 75% are private companies.

Private companies should have better access to capital, as investors shift to local markets and search for greater yields and more stable returns, diversifying portfolios and re-allocating investments.

The great wealth transfer should also disproportionately benefit the private capital market as an estimated US$18.4 trillion in wealth will be passed to younger generations by 2030 given the rapidly changing demographics that are expected.

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    This chart shows the breakdown of the US$18.4t estimated to be transferred by HNWIs before 2030 by geographic area. The forecast by region is US$11.1t in the Americas, US$4.4t in EMEIA and US$2.8t in Asia-Pacific. Note that HNWI includes individuals with US$5m+ in net worth.

Fresh investment perspectives from family offices

New owners typically bring a change in perspective, and family offices are already showing signs of investing differently to the previous generation. Our conversations with family offices suggest their interest in technology – especially start-ups – is likely to intensify, with investments across a range of innovations, notably fintech, biotech and e-commerce. This supports a diversification of portfolios, balancing of risk and return, and the opportunity to enter the market early should a particular technology take off.

EY teams supporting family offices are also seeing a growing preference for ESG-related investments with social impact, a trend likely to continue as the next generation of family members exert more influence on long-term investment strategy.

Although indirect investment in funds remains the dominant form of asset allocation, in our experience, family offices are steadily making more direct investments into target companies – in parallel building their in-house capacity for this form of investment. This contrasts with the 2000s, where such investing was less commonplace.

It’s not just family offices that are expanding their range of investments. PE, hedge funds, and VC players are also embracing “retailization” (investment in private companies and funds), as well as tokenization (digitalizing assets and trading them on blockchain – for faster and easier transactions).

A constant search for value

The current levels of uncertainty are unsettling for investors, as equities, bonds, cryptocurrencies, and other asset classes continue to exhibit volatility. In this environment, the growth and resilience of private capital offers some assurance and will likely cause a continuing shift from public to private companies and ongoing growth in family offices, PE, VC, and hedge funds, along with a rise in private credit.

As they seek to create value, investors are showing an increased appetite to diversify and earn higher returns from private markets. These have been further boosted by institutional and retail investors, along with the growing tranche of HNWIs, who in turn are passing on wealth to a new generation of family offices. Efforts to improve the monitoring of systemic risks in the sector, and to better assist investors in evaluating products continue to be welcome for private capital. We have certainly seen clear examples of increased governance across the asset class.

Overall, the positive indicators suggest a thriving private capital markets sector over the coming years.

  • Show article references#Hide article references

    1. EY Knowledge analysis using PitchBook and multiple secondary data sources.
    2. WealthX
    3. EY Knowledge analysis using PitchBook and DealLogic.
    4. EY Knowledge analysis; World Federation of Exchanges; Refinitiv
    5. EY CEO Outlook Pulse
    6. EY Private Equity Pulse
    7. Campden Research.
    8. EY Knowledge analysis 1. Campden Research 2. Sovereign Wealth Fund Institute 3. Forbes
    9. EY Knowledge analysis using PitchBook and DealLogic.
    10. EY Knowledge analysis using PitchBook and multiple secondary data sources.
    11. EY Private Equity Pulse
    12. EY Private Equity Pulse


The past two decades have seen a transformational shift from public to private markets, driven by a search for higher yields, sustained growth of high-net-worth individuals, rising intergenerational wealth, and companies going or staying private. Private markets have proved remarkably stable during a period of economic volatility, performing significantly better than public markets and offering excellent and diverse opportunities for institutional and retail investors.

About this article

By Ryan Burke

Global EY Private Leader

Global leader helping companies grow and profit in this transformative age. Passionate about eradicating child illiteracy and raising neurodiversity awareness. Father of two.