Podcast

Private markets outlook: Refilling the glass

Our experts examine private markets and the outlooks for private equity, private credit and commercial real estate in 2025.

Listen on Spotify Listen on Apple Podcasts
December 5, 2024 | 36 minute read

About this episode

As we approach the end of the year, sparks of life are emerging in private markets, fueling optimism for improved liquidity and a revitalized investment landscape.

Join Executive Director of Investment Research Andrew Korz and Research Associate Alan Flannigan as they examine private markets and the outlooks for private equity, private credit and commercial real estate in 2025.


Transcript excerpt

[00:00:04] Andrew Korz: Welcome to FireSide, a podcast from FS Investments. I’m Andrew Korz, Executive Director of Investment Research here at FS, and today we’re going to discuss private markets and the outlook for private equity, private credit and commercial real estate in 2025. Joining me for this discussion is my colleague, Alan Flanagan. Alan, welcome to the show. Good to have you.

[00:00:25] Alan Flannigan: Hey, great to be here, Andrew. Real buzz in these markets and exciting time to talk about them.

[00:00:29] Andrew Korz: For sure. No doubt about it. Excited for the discussion. I’d like to briefly plug the written version of our Outlook. It’s actually our inaugural private markets outlook from our research team here at FS and this is available on fsinvestments.com and we’ll link it in the show notes. I think Aaron, right, we can do that. It will be in the show notes.

So Alan, let me just level set some things here before we dive into the outlook. It’s been a really interesting four years, just to put it mildly. I think it’s important to briefly walk through what’s gone on over that period—in the rates market and how that’s impacted private markets, and where that leaves us today as we look toward 2025. So, if we go back to 2021, that was just a gangbusters year for market activity across markets.

If you recall, in the spring, we had the meme stock mania. We had a surge of IPOs, SPACs, you name it. People thought rates were going to be low forever. The economy was rebounding incredibly quickly after the dissemination of vaccines, and that fed into private markets as well, where you had deal activity surging in PE and in real estate.

You had valuations climbing ever higher and that was what I would call peak optimism in private markets. In 2022, I think inflation hit markets like a semitruck. Obviously, inflation started to accelerate. The Fed began to act at the end of Q1. They ended up raising rates by 425 basis points throughout the final nine months of that year.

I think of this as the year of shock and awe in markets. Nobody expected that level of tightening coming into the year. Public markets plunged. Everybody expected a recession, if you recall. And very quickly, private markets activity dried up. In PE, you had deal volume down more than 20% year on year. In real estate, it was closer to down 30%.

Fast forward to 2023, I think as a year of correction. Values across private markets were still too high for where rates had settled in. And until they adjusted, deals in these markets just were not going to get done. I think the saving grace was not only do we not have a recession, but the economy was actually remarkably strong.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

Any projections, forecasts and estimates contained herein are based upon certain assumptions that the author considers reasonable. Projections are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results. The inclusion of projections herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of the information contained herein, and neither FS Investments nor the author are under any obligation to update or keep current such information.

All investing is subject to risk, including the possible loss of the money you invest.

Alan Flannigan

Alan Flannigan, CIPM, CAIA

Associate, Investment Research

Andrew Korz, CFA

Executive Director, Investment Research

Search our site