2024 was a great year for private capital. Despite sluggish growth generally, with interest rates, geopolitical concerns and uncertainty over the US election weighing on markets, private capital in Australia was a standout with all private asset classes – private equity, VC, private debt, infrastructure, natural resources and real estate – combining to reach A$139 billion (US$90.52 billion), according to the Australian Private Capital Market Overview: A Preqin and Australian Investment Council Yearbook 2024.

Encouragingly, activity in secondary buyouts increased markedly. This is good news for investors through the value chain, as it provides more confidence around exits in the absence of much enthusiasm for primary listings across global markets.

There has been much chatter globally about the growth of private markets vs public markets, with new listings continuing to be relatively thin on the ground. Many companies are opting for private deals or Spacs (special purpose acquisition corporations) rather than listings, a fact that has not escaped the attention of regulators.

In Australia, the Australian Securities and Investments Commission has announced a review of private market transactions that is expected to last around two years. Prompted by significant deals like the A$20 billion sale of AirTrunk, regulatory scrutiny and the inevitable uncertainty it brings is likely to subdue private markets in Australia until it is complete.

Elsewhere, the US Securities and Exchange Commission has also voiced concerns as the US private credit market ballooned to A$1.7 trillion as of October this year, according to Bloomberg. Valuation risks – associated with the subjective methods of private valuations and the lack of transparency around pricing mechanisms – are of key concern to the US regulator.

With the global private market estimated to be valued at as much as A$14 trillion, according to the Financial Conduct Authority, these concerns are shared by the European Central Bank (and the International Monetary Fund who raised additional concerns about the exposure of the banking, insurance and private equity sectors to private credit as well as risks around liquidity.

Systemic risk posed by the growth in private credit has also been called out in the UK – the Financial Conduct Authority (FCA) undertook a review last year that will result in changes to both private and public markets, including the introduction of long-term asset funds into the UK retail market. The FCA has also called out private active exchange-traded funds as well as investment trusts as providing important transparency and stability to the sector. They have said they will open a consultation on a new disclosure regime for consumer composite investments in the coming months.

For 2025, this global scrutiny is likely to provide headwinds for private credit over the next 12 months. Stable, predictable markets like Australia will be more attractive to investors wanting to participate in alternatives.

For venture capital (VC), particularly early-stage VC, the boom in private capital is a positive signal for 2025. The early end of the VC market does not face competition from public markets, and deal sizes tend to be at a level below that at which regulators become concerned. Investors looking for growth are likely to be reassured, rather than repelled, by the regulatory scrutiny, as it provides more confidence in young companies’ runways to exits and that these will be more transparent and reliable under future regulatory frameworks.

Finally, for fintech specifically the scrutiny of private markets is likely to be a boon. Many regulators have pointed to technology and innovation as key planks to gaining transparency into, and oversight of private markets, so companies involved in capital markets will be well positioned to develop their offerings to fill these needs.

Dirk Steller is a partner at the Australian- and French-based venture capital firm Seed Space VC.