What are the key trends that JPMorgan sees for alternatives in 2025?

With alternative investments attracting increased attention from investors seeking to diversify their portfolios beyond stocks and bonds and hedge against inflation, what are the key trends in the major alts asset classes in 2025 and beyond?

JP Morgan Asset Management has published its latest Global Alternatives Outlook which looks at the next 12-18 months and identifies the opportunities for investors in private equity, private credit, real estate, infrastructure and transport, hedge funds, and secondaries.

“In an environment where traditional portfolios face headwinds such as high valuations, positive stock-bond correlations, and persistent rate volatility, the case for alternatives becomes increasingly compelling,” said Anton Pil, global head of Alternatives Solutions. “These conditions underscore the importance of diversifying with alternative investments to achieve more resilient portfolio outcomes.”

Among the key themes across each sector are:

Real Estate:

• Growth and Inflation Protection: Pro-growth policies are expected to bolster net operating income growth, with real estate offering potential inflation protection through rent increases and property revenue growth.
• Valuation Opportunities: US real estate presents a generational investment opportunity as valuations appear to be bottoming out, with improving fundamentals.

Infrastructure and Transport:

• Inflation and Trade Dynamics: Infrastructure and transport assets are well-positioned to provide critical inflation protection as we may see reconfigured supply chains and trade agreements evolve.
• Global Transport: Transport assets are expected to benefit from changes in global trade routes and increased demand for domestic logistics.

Secondaries:

• Capital Deployment: Secondaries offer efficient access to private equity and private credit activity, allowing investors to capitalize on growth-oriented companies while mitigating j-curve and blind pool risks. The expansion of alternatives into the private wealth market has also led to a rise in semi-liquid structures, which typically rely on secondaries to source liquidity and invest.

Private Equity:

• Pro-Growth Policies: US tax reform and deregulation are anticipated to enhance corporate profitability, reviving IPOs, M&A, and lending activities. This environment is expected to create favorable conditions for private equity dealmaking and exits.
• Valuation Considerations: Investors should be mindful of valuations, especially for investments initiated in the post-pandemic, low-interest-rate environment.

Private Credit:

• Lending Opportunities: A robust US growth environment and deregulatory agenda are likely to support both public and private lending, with private credit continuing to capture market share.
• Interest Rate Impact: Higher interest rates could pressure lower-quality borrowers, but also create opportunities for distressed and special situations credit strategies.

Hedge Funds:

• Volatility and Alpha Generation: Hedge funds are poised to navigate fiscal and monetary policy shifts, with market volatility offering opportunities for alpha generation, particularly through long/short strategies and macro hedge funds.
• Diversification: Given high correlations in equity and fixed income markets, hedge funds provide compelling diversification benefits and offer uncorrelated sources of return.

“Our 2025 Alternatives Outlook leverages our more than 50-year track record as a private markets investor, and this year’s outlook comes at a time when many types of investors are evaluating their allocations to alternatives,” said Jed Laskowitz, global head of Private Markets and Customized Solutions. “With the US economy in a mid-to-late cycle stage, private markets present potential opportunities for enhanced returns versus public markets, inflation protection, and diversification benefits.”