The number of private funds has tripled within the private market sector over the past decade to over 100,000 vehicles, and assets under management have swelled to over $13trn. 

The investor base for these types of portfolios has also evolved as assets such as private equity, private debt, infrastructure and real estate are no longer just an option for financial institutions. Through a variety of vehicles, retail investors are starting to gain exposure to this market.

However, this democratisation wave has come at a difficult time for the sector, which is grappling with steeper borrowing costs as central banks hike rates to levels not seen since the Global Financial Crisis. 

As markets speculate about whether or not the hiking cycle is over, attention has turned to how long central banks will keep rates elevated. Last month, Federal Reserve officials embraced a higher for longer approach to setting rates and slashed the expected magnitude of cuts for the next two years.

The impact of sharply rising interest rates has already been felt across the entire investment landscape, but for private markets, and private equity in particular, experts have said that the prolonged higher cost of funding would act as a headwind, given the heavy use of leverage of the asset class.