Pennsylvania-headquartered Hamilton Lane has just released its 2025 Market Overview report, showing that private markets are reaching an inflection point, though long-term fundamentals remain strong.

While the fashionable area of private market investing is not uniformly prospering, a report by global private markets investment manager Hamilton Lane says, prospects are positive for "evergreen," aka perpetual, funds.

The perpetual model of fund is gaining ground. Blackstone (see here), BNP Paribas Asset Management (see here) and HarbourVest (see here), for example, have also pushed into this area. “Perpetual” is a term describing a structure of funds that doesn’t come with the drawdowns, capital calls, exit deadlines and other traditional features of private market entities. They don’t carry the kind of liquidity constraints that might be a problem for investors in more established fund structures.

The Hamilton Lane report, which explores the global private markets landscape, indicates a downward trend in some areas such as fundraising, valuations and short-term performance, while other sectors are more resilient.

The report uses Hamilton Lane’s database that encompasses data on more than 58,000 funds across 57 vintage years. Evergreen funds will, the report said, grow faster than the overall rate of public markets over the next five years and institutional investors will become bigger players in the evergreen space, with fees set to decline.

Such funds account for about 5 per cent of the overall private markets. That’s about $700 billion. Hamilton Lane’s view is that 10 years from now, evergreen will be at least 20 per cent of total private markets. To reach that level, and assuming private markets continue to grow at their historic 11 per cent growth rate, evergreen would need to almost triple that rate, nearly 30 per cent annually, the firm estimates.

The US high net worth channel has about 1 per cent allocated to evergreen structures today. If that figure rose to 5 per cent or 6 per cent over the next 10 years, that 20 per cent overall share of private markets would be achieved, the report shows. The growth of evergreen funds will result in the largest private markets firms getting larger and smaller private markets firms struggling to get any market share, the firm added.

Sectors
Outlining areas in which to invest, the report shows that credit, infrastructure and secondaries are set up for success. Infrastructure and real estate have done very well in the short term compared with their public counterparts; private credit has remained stable, while private equity has underperformed. 

The factor that might make the biggest difference for future private equity performance is the public markets. Private markets’ outperformance is least pronounced when public markets see continued four-year annualised returns greater than 15 per cent.

Investors should have exposure to venture and growth, Hamilton Lane said, with AI applications likely to sweep the business landscape, many of those companies will be incubated and developed in the private markets sphere.

Due to the new administration, the US market is expected to be relatively more attractive than all other geographies over the next four to five years, the firm added. 

The next 12 months are likely to bring increased challenges for fundraising. Exit activity must see a meaningful rebound for fundraising to pick up. Competition is expanding, and the race to retail is on. The firms which are successfully accessing the fundraising market today are those which are investing in technology and innovative investment structures that address the demands of new audiences, the report continued.

Hamilton Lane said valuations from 18 months ago more accurately reflected true values, with public markets increasing to meet the private valuations. However, the opposite trend could unfold over the next 18 months.

Undefeated
The firm highlighted that private credit has remained undefeated, with 23 straight years of outperforming the public markets. Infrastructure and real estate have also maintained this trend for the past 12 or 13 years. It is only private equity buyout and real estate that saw the streak end in the last year. Hamilton Lane expects that this one-year dip is an anomaly and that, in five years, when looking at the vintage returns, the buyout internal rate of return (IRR) will have outperformed public returns in every year. Investors assuming that the last year is a window into future performance are ignoring the prior 30 years.

Co-investment activity is also continuing to increase, driven by several factors: fewer co-investment players in the market, a desire by general partners to conserve capital in a tough fundraising environment, increased acceptance by the market of co-investment as a standard practice of doing deals, and strong returns for funds and investors who have done co-investments on a regular basis, the firm said.

“Longer term, we continue to have high conviction in the value of this asset class, and we urge investors to read, study and think carefully about portfolio construction and the diversification benefits that private markets have consistently demonstrated,” Mario Giannini, executive co-chairman and author of the report, said.

Dealing specifically with private markets investing for more than 30 years, Hamilton Lane employs about 740 professionals operating in offices throughout North America, Europe, Asia Pacific and the Middle East, with $956 billion in assets under management and supervision.