After 23 straight years of outperforming public markets, it’s time for investors to recalibrate their exposure to private credit based on short-term pockets of risk and the long-term runway for growth.
At least that is the conclusion of Mario Giannini, executive co-chairman of US-based alternative investment manager, Hamilton Lane.
While private equity buyouts and real estate saw the run end last year, Giannini argues that investors who view this as a window into future performance are ignoring the previous 30 years.
Protection against downside risk
Giannini points to the numbers, which reveal that over no five-year period did investors ever lose money in buyouts, private credit or private infrastructure.
“This is one of the most unappreciated benefits of private market exposure in a portfolio: protection against downside risk,” said Giannini.
“A reasonably diversified buyout or private credit or private infrastructure portfolio would be hard pressed to lose money… the risk in these markets does not typically stem from losing money.”
With that in mind, Giannini believes the credit, infrastructure and secondary sectors are "primed for future success."
AI applications
While Giannini recommends investors have exposure to venture and growth, he expects AI applications to sweep the business landscape with many companies being incubated and developed in the private markets sphere.
Overall, he considers the United States market to be relatively more attractive than all other geographies over the next 4-5 years.
Despite predicted fundraising challenges over the next 12 months, Giannini believes firms to successfully access the fundraising market to be those invested in technology and innovative investment structures that address the demands of new audiences.
Meanwhile, Giannini expects co-investment activity to continue increasing due to fewer co-investment players in the market and a desire by general partners to conserve capital in a tough fundraising environment.
Giannini also cites increased acceptance by the market of co-investment as a standard practice for doing deals and stronger returns for funds and investors who have done co-investments on a regular basis.
Evergreen fund predictions
While evergreen funds – those allowing long-term investments in private companies with no fixed end date - currently account for around 5% (US$700 billion) of the overall private markets, Giannini expects this to quadruple to 20% within a decade.
Giannini expects evergreen funds to grow faster than the overall rate of public markets over the next five years.
Based on Hamilton Lane’s 2025 Market Overview, 415 new evergreen funds were launched globally between 2017 and 2023.
The Hamilton Lane report cites anecdotal conversations of “hundreds of new funds under discussion and development at any point in time today”.
Giannini also expects:
Institutional investors to become bigger players in the evergreen space.
Evergreen fund fees to decline over time.
Closed-end funds in certain strategies to decline and largely disappear.
The growth of evergreen funds to result in the largest private markets firms getting larger, while smaller private markets firms will struggle to get any market share.
Australian’s: World's biggest evergreen fund fans
Earlier this year, Hamilton Lane also discovered that Australians registered the highest enthusiasm for private markets out of all regions globally.
Over 60% of advised Australian clients were “very interested” in evergreen funds, compared with the U.S, Canada and European at 53%, 42%, and 33% respectively.
According to Preqin data, in 2023 there were 520 evergreen funds globally, double the number from five years earlier.
Based on Frontier Advisors estimates there are around 100 evergreen funds available in Australia, including Coller Capital Private Equity Secondaries Fund and Hamilton Lane’s Senior Credit Opportunities Fund.
While surging demand for private markets is bringing more evergreen funds to market, experts from EQT, Frontier and JANA warn that they’re not without risks.
EQT's head of private wealth APAC Sueann Yeo also suggests investors tread carefully with funds packaged with inappropriate underlying strategies such as venture capital or distressed assets, or vehicles run by inexperienced managers.
