Product innovation and new technologies are accelerating the democratization of private markets, according to State Street’s new report, 2025 Private Markets Outlook: Driving success in volatile environments. The report reveals the biggest trends affecting institutional investors in Hong Kong, drawing on our latest global survey of 480 investment firms.

We focus on three crucial themes, each of which has implications for the future of private equity, private credit, real estate and infrastructure.

The democratization of private markets: The survey highlights a shift toward retail-like products in private markets. Fifty-three percent of institutions in Hong Kong say that at least half of private markets fundraising will come through such products in as little as two years’ time.

Several developments are necessary to unlock growth in the semi-liquid fund space, including product innovation, according to 43 percent of institutions in Hong Kong. In addition, over half of respondents from Hong Kong (53 percent) say the industry needs to find ways to lower minimum wealth thresholds to make private markets more accessible to defined contribution investors.

A focus on quality: The shift from quantity to quality is now entrenched in investment strategies. Private market investments are seen as a way to manage risk, for example, with 59 percent of institutions in Hong Kong increasing their private equity allocations as a strategy to reduce portfolio volatility.

The emphasis on quality can also be seen in a shift in capital allocation plans from emerging to developed markets. Developed Europe has become much more of an investment priority for most respondents in the survey compared with last year, but the picture looks different for institutions in Hong Kong. Here, North America is cited as a top region for investment by over three-quarters (77 percent) of investors, while only 23 percent are prioritising developed Europe. Developed APAC is also a top investment target for 62 percent of Hong Kong respondents.

AI adoption in private markets: The AI revolution is already underway, and institutions in Hong Kong are at the forefront of this trend. Almost nine out of ten (87 percent) of respondents from Hong Kong recognise the opportunity to use GenAI-based large language models to make better use of their unstructured information.

The report goes on to explore why private markets are proving to be resilient at a time of increased market volatility and geopolitical uncertainty, as well as which private asset classes are most likely to benefit from the three trends outlined above.