Industry Trends
The rise of multi-private credit strategies in alternative markets
Since the Global Financial Crisis, banking regulations have led banks to reduce their exposure to corporate and real estate lending, creating a financing gap filled by Private Credit. This market has grown into a $40 trillion global opportunity, encompassing direct lending, asset-backed finance, and structured credit. As the market matures, investor expectations have evolved towards scalable, diversified, and liquid investment options. Multi-Private Credit strategies have emerged, combining various Private Credit segments within a single investment vehicle. These strategies allocate across direct lending, Asset-Backed Finance, and selected public credit exposures to capture relative value and mitigate concentration risk. Private Credit offers structural protection through covenants, collateral, and subordination, providing downside mitigation compared to public high-yield debt. The diversity within Private Credit allows for significant diversification in exposure and income sources. Banks and Private Credit lenders collaborate to address funding gaps, with banks handling origination and Private Credit investors providing credit risk capital. Established partnerships between banks and experienced Private Credit investors facilitate a continuous flow of high-quality deal opportunities. Evergreen structures offer an alternative to traditional closed-end funds, providing continuous capital inflows and outflows with frequent liquidity. These structures are well-suited to Multi-Private Credit strategies, allowing for immediate deployment into existing portfolios, regular income distributions, and scalable exposure over time. In volatile public markets, Private Credit offers stable income, low correlation to public markets, and inflation protection. The convergence of Multi-Private Credit strategies and evergreen structures represents the next generation of Private Credit investing, offering flexibility, institutional quality, and long-term viability.
Source: AXA Investment Managers
Private equity secondaries: Trends and prospects
The secondary opportunity in private equity, especially in the middle market, remains significant. This opportunity first emerged in 2022 due to a slowdown in IPOs and M&A activity, coupled with the Fed's aggressive monetary tightening. Institutions faced a painful denominator effect and were overweight in private equity, leading to negative cash flow positions. Despite some recovery, the secondary market continues to offer attractive pricing and volume, with 2025 expected to see double the volume of 2022. The slowdown in IPO and M&A volume has primarily affected large and mega-cap sponsors, while middle market transactions remain robust. Institutions are concentrated in recent private equity vintages, facing a poor exit environment. Liquidity has shifted from IPOs and corporate M&A to private transactions and the secondary market. Evergreen private equity funds should focus on long-term asset growth rather than short-term performance. Future Standard sees opportunities in sourcing high-quality assets at reasonable discounts in the LP secondary market and selectively participating in the GP-led market. Investing in alternatives involves higher risks and illiquidity compared to traditional investments. Financial professionals should consider individual financial objectives, risk tolerance, liquidity needs, and investment time horizon.
Source: Future Standard
Quarter Review
Private markets view Q4 2025
Despite recent declines in capital values, real estate returns are expected to grow, driven by higher income returns, particularly in the retail and multifamily sectors. However, logistics and office sectors face challenges due to market dynamics and demographic trends. Infrastructure investment trends are influenced by the Trump administration's policies, with increased interest in European and Asian markets for their stable environments and diversification benefits. M&A and buyout activities have been disappointing, leading to reduced dealmaking activities. Despite this, fundraising momentum remains healthy, with established managers capturing most inflows. US dealmaking fell by 18% in Q2 but remains elevated compared to previous quarters and is up 11% year-on-year, with a focus on larger, high-quality assets. High-growth sectors like AI/technology, healthcare, defence, and energy transition are expected to remain resilient. Real estate capital values have stabilized, with retail sector fundamentals improving due to low supply and a stronger tenant base. Logistics conditions have softened, particularly in the US, but a decline in development activity is expected to support income growth. The outlook for infrastructure remains positive, with steady performance from evergreen funds and significant fundraising in H1 2025. The Trump administration's policies, including the Big Beautiful Bill Act, impact infrastructure investing, particularly in solar and wind energy investments. Additionally, past performance is not indicative of future returns and investment outcomes depend on various factors, including market conditions and investment manager skill.
Source: HSBC Asset Management
Private equity outlook Q3 2025
The private equity outlook for Q3 2025 highlights three key strategies to navigate uncertainty: focusing on local champions, transformative growth, and multi-polar innovation. Despite ongoing macroeconomic volatility and geopolitical tensions, private equity valuations are attractive, offering opportunities for investors. Selectivity and diversification across investment strategies are crucial, with emphasis on balanced capital dynamics, domestic companies, risk premiums from complexity and innovation, robust downside protection, and reduced correlation with listed markets.
Small- and mid-sized buyouts are seen as resilient, offering attractive entry valuations, operational flexibility, and defensive earnings profiles. These deals typically employ modest leverage and have a predominantly local revenue base, cushioning against supply-chain disruptions and tariff changes. Continuation investments extend the value-creation runway beyond the conventional holding period, allowing investors to remain exposed to the same manager and asset, with faster return of capital and more predictable outcomes.
Early-stage venture capital provides access to a multi-polar innovation landscape, with less correlation to public markets. Innovation hubs in the US, Europe, China, India, and Asia-Pacific produce region-specific champions, contributing to portfolio diversification. Key sectors include enterprise software in the US, fintech in Europe, and consumer in China. Artificial intelligence, biotechnology, fintech, climate technology, and deep tech are driving disruptive progress globally.
Overall, private equity's potential to help investors navigate global uncertainty is emphasized, with strategies focusing on local champions, transformative growth, and multi-polar innovation offering resilience and return potential. Investors are advised to be discerning in selecting strategies and investments, considering the outlined attractive allocation options.
Source: Schroders
Market Sentiments
The dynamics of private market secondaries across asset classes
The secondaries market, traditionally seen as a last resort for liquidity, is increasingly being utilized by fund managers and investors for regular portfolio management. This shift is leading to the trading of assets beyond private equity, including venture capital, private credit, and infrastructure. As primary capital in private markets grows, so does the unrealized value, creating pressure for buying and selling existing commitments to manage otherwise illiquid investments. Transaction volumes are projected to exceed $200 billion by 2025, up from $40 billion in 2015, validating the market and expanding its role beyond liquidity provision.
Private equity buyout strategies, for instance, ended 2024 with about $4 trillion in assets, with growth expected to double by 2029. However, turnover of these assets remains low, with only about 2% trading in the secondaries market annually. A conservative estimate suggests that a 5% turnover could significantly increase secondary volumes by 2030.
Secondary strategies offer common benefits across asset classes but differ in aspects like diversification and pricing. Private credit secondaries are highly diversified, while venture capital secondaries often see larger discounts due to the early-stage nature of underlying assets. The trend of companies staying private longer is driving demand for secondary capital.
The market is also seeing the entrance of new buyers, with specialist investors driving volume in non-buyout asset classes. Estimates suggest that secondary transaction volumes could almost double to $381 billion by 2029, with a compound annual growth rate of 19% from 2024 to 2029. Despite this growth, the annual turnover rate is expected to remain relatively low, highlighting the market's growth potential.
Source: iCapital
Market opportunity/challenges
From volatility to value: Private equity's approach
Public markets are shrinking, with the number of listed companies in the US declining by approximately 40% since the late 1990s. Companies are staying private longer, with the average time to an IPO now exceeding ten years. In 2023, around 85% of US companies generating over USD 100 million in annual revenue were privately owned. This trend means many innovative businesses are growing while still private, offering early value creation opportunities through private equity investment. private equity allows investors to access companies scaling globally, refining business models, or consolidating leadership positions before public listing or strategic sale.
The current macroeconomic environment, characterized by higher interest rates and tighter liquidity, emphasizes operational excellence over leverage for returns. Private equity managers can acquire companies on attractive terms and implement strategic transformations to improve margins, expand market reach, and enhance governance, supporting stronger long-term outcomes and resilience during economic stress.
Private equity investment offers diversification beyond public markets, with returns rooted in company-level value creation rather than market sentiment. Private equity markets typically have lower correlations with public ones, helping reduce portfolio volatility and introducing independent return streams. Periods of market dislocation can present opportunities for private equity to capitalize on mispricing, with studies showing private equity funds launched during crises achieving higher-than-average returns.
Private equity provides access to transformative growth themes in sectors like AI, digital infrastructure, healthcare, and energy transition, often led by private companies. Manager selection is crucial due to significant performance variation, with top-quartile managers outperforming bottom-quartile ones by over 20 percentage points. Investing with diverse managers can reduce the probability of losses. Private equity markets offer professional long-term investors access to growth, operational control, and differentiated returns, positioning portfolios for the decade ahead.
Source: Julius Bar
Private credit’s next phase: finding opportunity in a maturing market
The evolution and maturation of the private credit market, emphasize on its natural progression rather than questioning its sustainability. The three fast-growing areas are: investment-grade corporate private placements, U.S. middle market direct lending, and pan-European upper mid-market lending. The value in private credit is driven by how managers invest, focusing on differentiated origination, disciplined underwriting, and active portfolio management. The market has grown 13% annually since the global financial crisis, encompassing diverse strategies like energy infrastructure, venture debt, and asset-backed finance. The investor base has broadened, with new capital from retail channels, pension plans, and insurance balance sheets reshaping the market.
Geographic diversity is significant, with the U.S. being the most developed market, while Europe shows greater fragmentation. Larger investors with significant check-writing abilities have better access to deals. The U.S. middle market, contributing one-third of private sector GDP, has seen a transformation, with certain resilient industries like commercial landscaping and pest control standing out. In Europe, a few pan-European platforms dominate the upper mid-market.
Investment-grade corporate private placements remain insulated from crowding pressures, offering durable income streams and defensiveness. Success in the maturing market requires partnering with managers who have the scale, relationships, and expertise to originate proprietary deals and secure strong terms. Proactive portfolio management is crucial, with top-tier managers emphasizing seniority in the capital stack and diversifying exposure. Private credit offers a compelling combination of yield, structural protections, risk diversification, and access to dynamic sectors, making it a valuable component of broader portfolio objectives.
Source: Nuveen
How low interest rates could boost the private equity market
Rising valuations and increased concentration in public markets are growing concerns for investors. Private equity markets have faced challenges recently, but lower interest rates are expected to support valuations and leverage in larger deals, positively impacting the private equity life cycle. The secondary private equity market is growing, offering a viable means for rebalancing positions and redistributing holdings across managers. Despite high expectations for private equity in 2025, challenges such as elevated debt costs and constrained financing tempered exit activity. Policy uncertainty further impacted private equity funds, leading to longer holding periods and increased use of continuation funds.
Improving market conditions since April, including new all-time highs for the S&P 500 and eased financial conditions, have reinvigorated private equity exit activity. The Fed's rate cuts are expected to continue, further supporting deal flows. Lower rates reduce debt costs, enabling greater leverage in new deals and refinancing existing debt, enhancing portfolio company value. The spread in private credit markets has narrowed, favouring M&A activity and leveraged buyouts (LBOs).
Higher rates and limited debt access have constrained larger private equity market activity but fuelled growth in the secondary market, with record-low distributions prompting new liquidity sources. The secondary market, particularly small- to mid-market segments, offers attractive opportunities with limited leverage and alternative exit strategies. Continuation funds, despite potential conflicts of interest, attract new secondary investment.
Private equity mitigates risks from rising public market valuations by expanding the opportunity set, with many private companies offering growth potential. Lower rates and improved debt access should support increased M&A activity and LBOs, positively impacting the private equity life cycle. The small- and mid-cap secondary market segment remains emphasized for growth due to favourable pricing, rising deal activity, and diverse exit opportunities.
Source: J.P. Morgan Asset Management
Sector Update
Risk management strategy: 20% growth in infrastructure investment
Infrastructure investments are increasingly seen as a key strategy for managing risk in uncertain times, with allocations expected to grow by 20% over the next five years, according to the PM700 report by IFM Investors. The report, which surveys over 700 senior investment professionals globally, reveals that the proportion of investors allocating to infrastructure is set to rise from 49% to 60% by 2030. This shift is driven by the need to combat geopolitical risks and macroeconomic volatility, with nearly half of investors citing diversification, inflation hedging, and resilience as primary reasons for investing in private markets.
The return gap between private equity and infrastructure is narrowing, with infrastructure equity and debt investments meeting or exceeding return expectations in the past 12-18 months. Net return expectations for infrastructure equity are now 13.4%, close to private equity's 13.65%, while infrastructure debt expectations are 9.6%. Investors are also advocating for regulatory and policy measures to unlock more investible projects, citing asset allocation constraints and deal supply issues as major barriers. Regional findings show that APAC has the highest current and planned allocations to infrastructure, driven by Australian investors. In North America, nearly half of investors plan to invest in infrastructure within the next year, with a focus on higher risk/return profiles. In Western Europe, investment is set to increase significantly, particularly in the Netherlands, Germany, and the UK.
Source: IFM Investors
ESG Trends
Sustaining the private capital opportunity in climate
In 2024, private equity transactions in the climate sector reached $73 billion, a decline from $114 billion in 2021. Despite this, climate-focused fundraising increased by 20% from 2023 to 2024, while overall private equity capital raised fell by 18%. A survey by S2G Investments revealed that 46% of asset owners plan to boost their climate investments. CalPERS, for instance, doubled its climate fund to $100 billion. Investment opportunities are emerging in low-carbon technologies, circularity, adaptation, and resilience solutions. Companies pursuing green growth from 2016 to 2024 saw higher revenue valuations.
Attractiveness of investment opportunities varies by investor type, segment, and region. Analysis of eight industry segments and 46 subsegments identified promising areas for infrastructure and private equity investors. For infrastructure investors, attractive subsegments include electricity grids, electric charging infrastructure, energy storage, renewable power, and waste-to-energy systems. For private equity investors, promising subsegments include alternative proteins, biofuels, carbon measurement, distributed energy, and sustainable finance solutions.
A deep dive into 15 subsegments highlighted five particularly promising areas. One niche is the decommissioning or conversion of old assets, which accounted for 15% of deals in early 2024. The global utility-scale battery energy storage system (BESS) market was $30 billion in 2024, expected to grow to $70 billion by 2035. The global energy service company (ESCO) market was $35 billion in 2023, projected to reach $50 billion by 2030. Biofuels, driven by decarbonization mandates, are expected to grow from $175 billion in 2024 to $215 billion by 2030. Waste management and electricity markets also present significant opportunities. Investors should monitor policy and geopolitical landscapes, identify early opportunities, embrace complexity, and support portfolio companies in de-risking large projects to capitalize on these evolving investment opportunities.
Source: BCG
