Market-based approaches assisting investors in overcoming ambiguity
In today's volatile global economy, investors are seeking strategic solutions to achieve resilience, income, and returns. This growing demand is fueled by a complex mix of factors, with private markets emerging as a popular choice.
Geopolitical uncertainty and market volatility have prompted investors to seek alternative, less correlated investments in private markets to enhance portfolio resilience. The ongoing geopolitical tensions and slower exit activity in traditional public markets have made private markets an attractive option for those seeking to mitigate risks.
Return premium is another key factor driving the interest in private markets. These markets tend to offer a potential return premium over public markets, making them an attractive option for investors seeking higher yields amid extended periods of low interest rates and public market volatility.
Liquidity innovations have also played a significant role in making private markets more accessible. Although private investments typically have lower liquidity, new structures such as continuation vehicles, secondary sales, credit restructurings, and semi-liquid vehicles are improving liquidity options for investors.
Increased access for a wider investor base is another trend shaping the private markets landscape. Technological advancements, regulatory changes, and new financial products—such as fintech secondary marketplaces and tokenized offerings—are expanding private market access beyond traditional institutional investors to include individual and retail investors.
Demand from institutional sectors, especially insurers, is another significant driver. Insurance companies, with large pools of investable assets, increasingly rely on private markets to generate higher yields and diversify risks, often outsourcing asset management to specialist alternative managers.
Thematic opportunities like artificial intelligence are also attracting investment in sectors with high growth potential. Private markets are incorporating themes such as AI across venture capital, buyouts, and real assets.
Flight to quality and the search for resilience is another factor driving the appeal of private markets. Large established private market funds (GPs) compete for high-quality deals, while investors also find opportunities in smaller funds and across credit, equity, and real assets, reflecting a preference for quality assets to weather uncertainty.
Shift in capital flows and exit dynamics is expected to reshape the private markets, providing fresh capital recycling and investment opportunities. Anticipated surges in private equity exits (e.g., delayed exits from portfolio companies) could reshape the private markets landscape.
Key trends in identifying private equity opportunities include local champions with operational and transformative growth potential, and multi-polar innovation. Across private debt and credit alternatives, specialized strategies are key, with increasing volatility offering opportunities across the debt spectrum.
Real estate, when approached with a hospitality-led approach, can enhance income through services that foster tenants' success. Specialty finance, asset-based lending, and real assets debt can offer stable, high income or diversifying cashflows, often capitalizing on market inefficiencies.
Renewable energy infrastructure remains compelling due to its strong inflation correlation and secure income traits. The most attractive opportunities now clearly lie in Asia and Europe.
In a market with heightened idiosyncratic risk, diversification is important. The broad universe of private debt and credit alternatives is the top-ranked option for investors seeking to generate income over the next 12 months.
A recent Global Investor Insights Survey canvassed the views of nearly 1,000 institutional investors and wealth managers overseeing approximately $67 trillion in assets. The survey revealed that private equity is ranked number one overall for return opportunities among institutional investors.
In conclusion, the rising investor appetite for private markets as a way to navigate global uncertainty and achieve resilience, income, and returns is driven by several key factors. These include geopolitical uncertainty and market volatility, return premium, liquidity innovations, increased access for a wider investor base, demand from institutional sectors, thematic opportunities, flight to quality, shift in capital flows and exit dynamics, and the growing interest in actively managed strategies. However, it's important to note that there will be some private market strategies that exhibit notably better risk/return profiles than others in the current market environment.
[1] Schroders Global Investor Insights Survey 2025: https://www.schroders.com/en-gb/uk/intermediary/global-investor-insights-survey-2025/ [2] Private equity performance during crisis periods over the past 25 years:
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