Given the rise in interest rates, these are 5 investment trends in the private sector for Life. The high-interest era of recent decades encouraged a flood of investment capital into the private market. This has allowed fund managers to raise financing and obtain cheap loans while allowing companies to remain in the private sector for longer rather than listing on the public stock market.

Private capital is now used to finance all types of businesses in the real economy, stimulating innovation by financing start-ups, providing non-bank lending facilities through private credit, and supporting the development of long-term projects in the real estate sector and infrastructure.

These changes were analyzed throughout the program of the World Economic Forum’s Annual Meeting, and five key insights emerged about the future of private markets.

1. Funds over financing

Despite the recent slowdown in fundraising and economic deals, there remains a record amount of uninvested capital across all asset classes. But as interest rates stabilize, private investors are shifting their attention from short-term liquidity needs to long-term value creation strategies, focusing on how operational expertise can generate marginal growth, not just multiple expansions.

2. IPOs are not for everyone

Global IPO activity (when a company lists on a stock exchange such as New York) has fallen in recent years. Going public is a way to reward investors, access more capital, or send a signal to the market about the stability or credibility of the company.

However, going public is not the right path for all growing companies. Many are not prepared for the disclosures or the great volatility that comes with listing on a public stock exchange. They may be better off staying in the private sector, especially if they have access to enough capital or income to continue operating at the current high cost of borrowing. This is where the secondary market, which has also boomed as IPO activity has stalled, can help by offering opportunities to sell shares or entire companies between private funds.

3. Politics as investment risk

In recent years, even as more capital and attention have flowed toward technologies that promote decarbonization, adaptation, and climate resilience, there has been a politicization around the use of environmental, social, and governance (ESG) criteria in management and investment decisions. This has led to anti-ESG legislation; some US states have even announced plans to withdraw capital from certain fund management due to their ESG strategies.

In 2024, with more than 2 billion voters in 50 countries heading to the polls, it becomes increasingly important for investors to incorporate the political climate and electoral cycles into their risk assessments for capital deployment, portfolio operations, and exit opportunities.

4. Expand access beyond large institutions

As fundraising has weakened among traditional sources of capital, the retail wealth channel (private investors) presents a large, and under-exploited, opportunity for private market funds. Many individual investors currently have limited access to private markets due to issues such as barriers to entry, suitability requirements, and regulatory and educational gaps. This means they may miss out on the opportunity for higher returns and income, as well as greater investment diversification.

5. The rise of private credit

The rapid growth of private credit and loans granted by non-bank financial institutions was alluded to throughout the private market discussions at the 2024 Annual Meeting. Non-bank financial institutions, from public pension funds to insurers, foundations, and family offices, have stepped in and provided lines of credit to companies.

This has attracted the attention of regulators: private credit loans typically have a variable exchange rate (compared to the fixed rate of a bank loan), as well as higher spreads and limited liquidity. They also tend to be more opaque when it comes to determining who grants, markets and distributes the loans, which can pose a greater risk than traditional bank loans.