2024 saw alternative assets become core components of private investor portfolios. Participation consistently rose throughout despite economic conditions broadly being challenged. 

To assist investors as you think about the new year ahead, here are six investment trends we feel will be relevant for alternatives investing in 2025: 

1. An increase of public markets utilising the private markets as joint funding sources.

   A theme that came in 2024 that we see growing across 2025, will be an increased volume of public entities utilising private markets for specific funding within their capital stack. This will create new opportunities for private market lenders, but will also coincide with increased competition for assets, as new entrants have continued to emerge as alternative lenders. This year we saw corporate credit flow in business that avoided tapping equity markets. 
   

2. Lowering rates will come from two areas. The well documented expectation for central bank activity, but also from high competition across lenders particularly in the first half. Whilst the exact timing of when Australia follows the global suit and makes a reduction to base rates will continue to be debated. However, it is near certain in the 2025 year, rates will move lower at some point. Consumers and consumer discretionary exposed businesses will appreciate the relief, whilst those that are investors, will be able to decrease their satisfactory acceptance levels for return profiles in a lower inflationary environment. We expect to see investors that previously may have always sought double digit returns, consider high single digit private assets when the assets merits can be easily understood. 

   

   
   

3. Real estate debt financing will continue to be highly competitive.

   Cheaper costs will be available for borrowers as strong competition continues across lenders. For real estate lenders, avoiding funding assets at levels where the funding return is not commensurate to the asset quality will be the greatest risk to be avoided. In construction related activity, we have largely avoided direct construction exposures over last two years, however 2025 will see selective opportunities open up in construction where costs have largely stabilised, albeit at substantially higher levels than were seen two years prior. Weaker balance sheet developments have started to recede, but complexities for approvals will remain high, leaving consideration for some construction exposure only when sound balance sheet support exists and where private covenant negotiations can be met. 

   
   

4. Opportunistic asset acquisition.

   Whilst the 2024 year was generally difficult for many select companies and borrowers that were paying high costs of capital, the new year will provide opportunities to consider asset acquisitions from existing holders looking to depart longer held assets. There will be assets available for consideration where incumbents simply seek to get out of positions. This will likely coincide with a pick-up in general M&A activity also. Asset sellers may be willing to take a haircut on valuations for selective assets that have been held for lengthy periods, which will drive real asset acquisition opportunities. 

   
   

5. Consolidation within private credit providers.

   We expect consolidation across some private credit participants, as many newer and less experienced providers currently operate at subscale levels. Consolidation to occur following a period where sourcing of quality assets and raising appropriate capital will be challenged, particularly in the property debt space. We expect a cohort of newer entrants will choose to exit, be challenged by lesser asset quality or be acquired by larger more established players. 

   
   

6. Global themes will support local funding.

   A difficult year ahead economically with low growth will see the general market uncertainty remain high, but could be supportive to local funding markets. Deglobalisation will have relevance for funding as companies focus on their availability of local sources of capital. As higher tariffs get applied globally, the deglobalisation theme will have an effect on how businesses think about capital needs. A stay local mentally will be prominent across small and mid-size borrowers, seeking flexibility in their term structures and placing greater value on ease of execution as being important.