PwC: Private capital at a crossroads
As industries converge and disruption intensifies, five key principles will help firms seize emerging opportunities.
By Duncan Cox, UK Private Equity Leader, Partner, PwC United Kingdom; Clara Cutajar, Global Capital Projects and Infrastructure Leader, PwC Australia; Eric Janson, Global Private Equity and Principal Investors Leader, PwC United States; and Josh Smigel, US Private Equity Advisory Leader, Partner, PwC United States
Industries are reorganising around essential human needs: how we feed and care for ourselves, move, make, and build things, and how we fuel and power it all. Spurred by disruptive megatrends such as AI and climate change, companies are leaving their familiar industrial silos and, instead, operating and collaborating in these porous cross-industry domains. This enormous and consequential shift – what we at PwC call ‘value in motion’ – blurs traditional sector boundaries, opens the door to new models of value creation, and forms the basis of new investment theses. Take the construction of data centres as one example. To build out the infrastructure that supports the rollout of transformative AI systems, construction firms, investors, hyperscalers, chip manufacturers, power providers, and government agencies will have to collaborate intensely – and in entirely new ways. These developments and others like them are creating substantial opportunities for the private capital industry, which remains on a solid growth trajectory.
We forecast growth based on three scenarios: low, base, and high. In these scenarios, we expect the private capital sector to grow at a CAGR between 8% and 10% through 2030 to reach between US$25 trillion and $28 trillion in assets under management (AUM), from $16 trillion today. With $3.6 trillion in dry powder, the diverse set of players – which includes private equity (PE), private credit, sovereign wealth funds, infrastructure, and other forms of principal investing – is well-positioned to act as the essential catalyst for industry transformations requiring patient or innovative capital. Sovereign funds and family offices often think in decade-long horizons. Private equity firms can commit capital with five-to-seven-year mandates. And private credit players can tailor structures to accommodate emerging asset classes. Their scale, flexibility, and long-term orientation make private investors uniquely equipped to shape the ecosystems emerging in the global economy. Firms that embrace this moment won’t just generate alpha. They’ll define the economic architecture of the next generation.
But private markets themselves are at an inflection point, grappling with structural issues, fundraising headwinds, and questions about long-term differentiation. The median holding period of PE-backed companies has been growing longer. IPO and M&A markets have yet to fully bounce back, limiting exit paths. Fundraising is more narrowly concentrated among a few firms, with larger players growing disproportionately. Regulatory scrutiny is rising, and macroeconomic volatility, interest rate uncertainty, and geopolitical risk add further complexity.
As a result, like the industries in which they invest, private capital players must reinvent their business models and approaches in order to survive and thrive in the evolving world. And cross-sector convergence may be private capital’s answer to its current constraints. Thematic investing around human needs offers scale, defensibility, and relevance – all of which are key in a market facing exit delays and rising expectations from limited partners (LPs).