Private markets: A shift from momentum to selectivity

In our view, this suggests a more selective, dispersion-driven environment, where opportunities remain compelling but are increasingly concentrated in high-quality assets, resilient cashflows, and structural growth themes.

A more uncertain macro backdrop

The starting point is a global economy that is slowing but resilient. Growth remains intact across major economies, with the US expected to expand by around 2.2% in 2026, China around 4.8%, and India close to 6.8%, respectfully.¹

However, inflation pressures, geopolitical risks, and diverging policy paths continue to drive volatility. Recent tensions in energy markets have reinforced uncertainty, even as easing monetary conditions begin to offer some support.

In this environment, we believe private markets are playing a critical role in portfolios as a source of resilient income and long-term structural exposure.

Private equity

Resilient valuations, but a narrower market

Private equity deal activity softened at the start of 2026. US deal value fell 18.3% quarter-on-quarter to $260.2 billion, while European deal value declined 22.5%.² Yet, headline numbers mask a more nuanced picture:

Source: Preqin, May 2026.

In short, we believe the market is becoming more selective. Capital is concentrating in high-quality assets, often accessed through bolt-on strategies rather than large headline-grabbing deals.

Crucially, returns are becoming less reliant on multiple expansion. Instead, sector selection, operational value creation, and disciplined entry pricing are becoming more important drivers of performance.

Private credit

Conditions are turning in lenders’ favor

Private credit remains one of the most structurally supported areas of private markets. As banks continue to pull back, demand for flexible capital still outstrips supply. And while activity has shown to have slowed – with US direct lending volumes at $71 billion across 199 deals – we believe conditions have become more attractive for lenders with several trends standing out:^5,6

The opportunity set remains particularly strong in mid-market and more complex lending situations, where disciplined underwriting can help capture attractive risk-adjusted returns.

Infrastructure

Income takes center stage

Infrastructure continues to benefit from powerful structural tailwinds, especially the energy transition and digitalization. Global deal activity reached around $327 billion in Q1 2026 – up roughly 10% year-on-year.⁹ However, we believe the nature of returns is evolving.

With interest rates higher than in the previous cycle, returns are increasingly driven by contracted or regulated cash income rather than valuation expansion. This shift is also visible in valuations, with core-plus infrastructure trading at around 13.6x EV/EBITDA, below its 10-year average of 14.8x.^6,7 At the same time, fundraising is becoming increasingly concentrated:

Real estate

Recovery, but uneven

Real estate is gradually recovering, but the rebound remains uneven and highly sector dependent. Transaction activity reached $216 billion globally in Q1 2026 – up 18% year on year, with strong growth in Asia-Pacific.⁵ At the same time, capital flows are returning selectivity:

However, fundraising remains weak, and performance is increasingly polarized. Yield spreads over bonds have narrowed to around 150 bps in Europe – reducing the cushion available to investors.² As a result, returns are becoming more dependent on income resilience, asset quality, and sector selection than on a broad market recovery.

A more selective opportunity set

Across private markets, a consistent theme is emerging: dispersion is rising.

The easy gains from falling rates and multiple expansion are becoming harder to rely on. In their place, a more nuanced landscape is taking shape. One where performance depends increasingly on:

Return expectations remain attractive but achieving these outcomes will require active selection and disciplined deployment.