The Institutionalization of Private Credit 

Private credit is no longer a specialist allocation. It now operates as core infrastructure within institutional portfolios. Larger platforms, more diverse lender groups, layered capital structures, and increasingly active secondary markets have materially expanded the complexity of credit transactions. 

This evolution has changed the operational demands surrounding a deal. What begins as a carefully negotiated credit agreement often evolves through amendments, incremental facilities, covenant resets, refinancing, and at times, restructuring.  

Over the lifecycle of a transaction, complexity compounds. The durability of a structure therefore depends not only on the quality of underwriting or documentation, but on whether the operational framework supporting the transaction can sustain that complexity without friction. 

Within this framework, agency sits at the operational center of transaction execution.  

A Quiet Function with Structural Consequences 

The agent’s role can appear procedural at first glance: maintaining lender registers, processing payments, coordinating notices, and administering consents. 

In practice, the agent functions as the transaction’s operating system. 

In multi-lender environments, neutrality, precision, and coordination are essential. Voting thresholds must be calculated accurately. Consent requests must be coordinated across participants with differing mandates and timelines. Payment calculations must be precise. Covenant reporting must flow consistently and transparently.  

When these processes operate effectively, they are largely invisible. When they falter, consequences surface quickly — delayed amendments, disputes over consent mechanics, misaligned lender expectations, or avoidable strain during periods of market stress. 

Execution risk in private credit often materializes not in underwriting models, but in the mechanics of administration — where coordination and procedural discipline are tested in real time. 

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Where Agency Quality is Tested 

Transactions rarely remain static. Borrower performance evolves, lender bases change, and market conditions shift. 

Moments that require coordinated lender action — amendments, covenant waivers, incremental facilities, or secondary transfers — place significant pressure on the administrative framework supporting the deal. 

At these points, the question is not whether the documentation was carefully drafted. It is whether the operational infrastructure surrounding the transaction can deliver clarity, coordination, and procedural consistency under time pressure. 

These lifecycle events reveal the operational quality of the agency framework. Processes that function smoothly in stable periods are tested when lender coordination must occur quickly and consistently across institutions. 

Governance Expectations Have Caught Up 

Private credit now operates within a fully institutional ecosystem. Investors routinely evaluate operational infrastructure as part of due diligence. Control environments, recordkeeping standards, audit trails, and information dissemination are examined alongside investment strategy.  

Regulatory focus across major jurisdictions continues to emphasize governance discipline and operational resilience. 

Agency sits squarely within this framework — not as administrative support, but as part of the control environment. 

The integrity of cash movements, the accuracy of lender registers, the audit trail supporting amendments and waivers, and the consistent dissemination of information are not background processes. They are elements of governance credibility. 

As operational infrastructure becomes part of investor due diligence, the selection of an agent increasingly carries implications beyond administration. It influences governance discipline, execution reliability, and lender confidence in complex structures.  

Speed, Flexibility, and the Timing of Agency Engagement   

Private credit transactions move quickly. Agency teams are expected to onboard complex structures efficiently and provide immediate operational support as deals progress from signing to closing. 

The timing of agency engagement can materially influence how smoothly operational processes function over the life of a facility. When agency considerations are incorporated during transaction structuring, operational workflows can be aligned more closely with the intent of the documentation from the outset.  

This alignment can help streamline later lifecycle events such as amendments, transfers, and lender coordination. 

When agency is engaged later in the process, experienced platforms must mobilize quickly to support execution without slowing transaction momentum. 

In fast-moving markets, the objective is not simply speed at closing, but the establishment of operational frameworks capable of supporting the transaction consistently as it evolves.   

The Risk of Treating Agency as Procedural 

Despite this shift, agency is still frequently appointed late in the transaction lifecycle. 

When operational considerations are incorporated only after documentation is largely finalized, administrative processes must adapt to structures that may not have been designed with lifecycle complexity fully in view. Reporting protocols may lack standardization. Escalation frameworks may not yet be tested. 

These gaps rarely disrupt closing. They emerge later — during amendments, consent solicitations, increased transfer activity, or periods of market volatility. At that point, remediation consumes internal capacity and can introduce avoidable friction into lender coordination. 

Embedding agency considerations earlier in transaction design reduces that exposure and aligns operational execution with documentary intent from the outset. 

Scaling Platforms Without Scaling Friction  

The continued growth of private credit platforms increases operational density. More transactions, more lenders, more jurisdictions, and more reporting obligations expand the surface area for administrative risk. 

Institutional agency capability operates as a stabilizing layer within that expansion. Standardized workflows, defined escalation processes, and systems that enable controlled information access allow complex lender groups to coordinate efficiently while maintaining procedural integrity. 

Without that infrastructure, scale compounds operational exposure. With it, platforms can expand while maintaining consistency in execution, reporting, and lender coordination. 

For managers operating increasingly large credit platforms, agency therefore functions as operational infrastructure that enables growth without adding friction. 

A Structural Role in a Mature Market 

As private credit markets mature, performance remains central. But governance resilience and procedural consistency increasingly differentiate leading platforms. 

Agency sits at the intersection of those dynamics. 

At Alter Domus, our experience supporting private credit managers and lender groups through agency and loan administration services reflects this shift. Across complex multi-lender structures, operational frameworks established early in the transaction lifecycle tend to support clearer lender coordination, more consistent governance processes, and more predictable execution as facilities evolve. 

By combining institutional agency capabilities with broader private markets servicing expertise, Alter Domus supports managers in building operational frameworks that remain efficient and resilient across the full lifecycle of a transaction. 

As the market continues to mature, the distinction between administrative support and operational infrastructure will become clearer. 

In today’s environment, agency selection is not peripheral to risk management. It is a structural decision that shapes execution certainty, governance credibility, and downside control. 

It is a first-order risk decision. 

Resilient by Design.

As wider credit markets face mounting pressure, why do European CLOs remain the “choice strategy” for global investors?

Amit Varma, Juliana Ritchie, and Tim Ruxton join the industry’s most influential voices at FT Live‘s Euro CLOs Forum in London.

Ask them how our specialized structured finance solutions provide the transparency needed to navigate today’s uneven credit cycle.
#EuroCLOs #StructuredFinance #LondonFinance

Edward Hamilton-Russell and Joe Knight will be attending DealCatalyst’s European Private Credit on Direct Lending Conference in London on 23 February.

With private credit continuing to play a pivotal role in the European financing landscape, the event brings together leading GPs, LPs, arrangers, and advisors to discuss market dynamics, fundraising trends, deployment strategies, and the evolving risk environment.

Connect with Ed and Joe there to discuss how Alter Domus supports private credit managers with scalable fund administration and debt capital markets expertise.

hashtag#PrivateCredit hashtag#DirectLending hashtag#EuropeanMarkets

The Alter Domus team will be onsite at Structured Finance Association‘s SF Vegas, connecting with leaders across the private credit ecosystem. From fund launch to ongoing administration and reporting, we help managers navigate complexity and scale with confidence.

Visit us at booth #17 to continue the conversation.

Eric P. Duncan, Greg Myers, Jeffrey Law, CFA, Kennedy G., Peter Himes, FRM, Randall Reider, Stephanie Golden, Tim Ruxton, Thomas Gandolfo

Onboarding has also become more demanding. Investor expectations are higher, and KYC and AML requirements remain complex. In Fenergo’s 2024 survey of more than 450 Tier 1 asset management firms, 74% said they had lost a client due to slow or inefficient onboarding.

Below is a practical playbook to shorten timelines, reduce rework, and deliver an onboarding experience that matches institutional standards.

Why a Smooth Onboarding Process Matters to LPs

LP operations teams juggle multiple managers, vehicles, and reporting cycles. They want onboarding that is efficient, auditable, and consistent.

A well-run process supports two outcomes that matter to LPs and regulators:

• Operational confidence: Onboarding sets expectations for how responsive and disciplined you will be once the fund is live.
• Defensible compliance: Global guidance, such as the FATF Recommendations, emphasizes a risk-based approach and effective controls, supported by documentation and recordkeeping.

Regulators have shown they will act when a private fund manager’s onboarding controls do not match what it tells investors.

In January 2025, the SEC charged Navy Capital Green Management with misrepresenting its anti-money laundering due diligence to private fund investors and found instances where the firm accepted subscriptions without consistently completing the identity, beneficial ownership, and AML documentation steps described in its investor materials.

The takeaway for fund onboarding is straightforward: your process needs an evidence trail that proves what you collected, what you verified, what you approved, and when.

Pre-onboarding prep: get internally ready

Speed comes from clarity, not urgency. Before you try to move faster, reduce avoidable friction inside your own team.

• Create a single source of truth: Decide where onboarding status lives and who updates it. A workflow tool, CRM, or tracker can work if it is the one place everyone relies on.
• Codify requirements by investor type: For each investor category and jurisdiction, document what you need, why you need it, and who reviews it. Include KYC and AML checks, tax forms, subscription documents, side letter workflows, and wire instructions. Many of these requirements are established during the fund formation process, so aligning legal, compliance, and ops early reduces rework later.
• Set internal service levels: Define review turnarounds, escalation paths, and ownership. If your timelines depend on heroics, the process will not scale.

7 best practices for faster fund onboarding

1. Automate the repetitive steps in document workflows

Many delays come from manual work that is easy to standardize. Focus automation on tasks like:

• Pre-filling subscription documents using known investor data
• Triggering checklists based on investor type and geography
• Routing documents for review with time stamps and audit logs

Automation does not remove judgment. It removes busywork and makes outcomes more consistent.

2. Use a secure investor portal to reduce email churn

Email creates version-control issues and forces LPs to hunt through threads. Using a secure investor portal solution centralizes intake and communication, providing a cleaner audit trail.

Many fund managers rely on their fund administrator’s technology stack to support this, helping ensure onboarding workflows are consistent, secure, and aligned with operational and compliance requirements.

At a minimum, the portal should let LPs:

• Upload documents securely
• See exactly what is outstanding
• Confirm what has been received
• Ask questions in one place

This is also where you can reinforce a professional, branded experience without adding complexity.

3. Standardize KYC and AML with a risk-based framework

Most firms do not struggle with intent. They struggle with inconsistent execution across teams, funds, and investor types.

Create a KYC and AML package that is:

• Risk-based. Apply enhanced diligence where it is warranted, not by default.
• Consistent. Train teams to follow a uniform checklist and review path.
• Documented. Record decisions, exceptions, and rationale so reviews are defensible

Where possible, align your checklist with your fund administrator or other providers to avoid duplicate requests. LPs feel friction most when multiple parties ask for the same information in slightly different formats.

4. Assign a single onboarding owner for each LP

Every onboarding needs a quarterback. Without one, tasks drift between investor relations, compliance, legal, and the administrator.

The onboarding owner should:

• Run a kickoff call for complex subscriptions
• Own the tracker, timeline, and escalations
• Coordinate inputs across internal teams and providers
• Keep communications clear and consistent

This role is especially important when you are onboarding multiple entities under one LP umbrella, or when side letter terms add custom steps.

5. Segment communications so each LP gets the right level of touch

LPs want clarity, not noise. Your update cadence should match complexity.

A simple segmentation model works well:

• Straightforward subscriptions: concise updates with clear next steps
• Complex entities: scheduled checkpoints and explicit escalation paths
• Strategic LP relationships: proactive messaging that anticipates internal approvals and timing constraints

Keep the writing direct. Confirm what you received. State what is next. Name the blocker if there is one. That alone reduces follow-ups.

6. Make status transparent with milestone-based tracking

Even with a portal, many LPs still want a quick view of progress. Transparency reduces uncertainty and cuts down on ad hoc check-ins.

Give LPs a milestone view that mirrors your internal workflow, such as:

• Documents received and validated
• KYC and AML review in progress or complete
• Subscription accepted
• Wire instructions verified
• Final close readiness

Whether this lives in the portal, a weekly digest, or both, consistency matters more than format. The goal is simple: LPs should never wonder where things stand.

7. Define and share onboarding SLAs that set expectations

Institutional LPs are used to SLAs across their operating stack. Onboarding is no different, especially for repeat allocators.

Offer realistic SLAs that cover:

• Document review turnaround times
• KYC and AML review timeframes
• Response time for questions
• Wire verification steps and timing

Do not overpromise. A credible SLA that you meet builds trust. An aggressive one you miss creates frustration and escalations.

How to measure onboarding success

If you are not measuring, you are guessing. Track a small set of metrics that reflect both speed and quality:

• Time to close: days from first outreach to accepted subscription
• Touch count: number of back-and-forth interactions required
• Exception rate: percent of onboardings requiring rework due to missing or incorrect information
• Capital call readiness: percent of investors fully operational before the first call

Also, capture qualitative feedback. A short post-close note to the LP operations contact often reveals where friction really sits.

Putting it all together

A faster onboarding process is not about cutting corners. It is about designing a workflow that is consistent, transparent, and aligned with institutional expectations.

Start by tightening internal ownership and your source of truth. Then reduce avoidable manual work. Finally, raise transparency so LPs can self-serve status and avoid repetitive follow-ups. Do those three things well, and onboarding becomes a strength, not a bottleneck.

Make onboarding one less thing your team has to chase. Connect with Alter Domus about fund administration services to streamline the fund onboarding process, standardize KYC and AML reviews, and give LPs clear, real-time transparency from subscription through close.

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Private Equity:
2026 Outlook

Private equity at an inflection point

After a prolonged period of stalled exits, cautious capital deployment, and repeated false dawns, private equity enters 2026 at a genuine inflection point. Exit markets are reopening and deal momentum is building, but the next phase of the cycle will not mark a return to the pre-2022 status quo. Instead, structural shifts in liquidity options, fundraising dynamics, and investor composition are reshaping the contours of the asset class. For general partners, success in 2026 will hinge not simply on a market rebound, but on adapting to a permanently changed private markets landscape.

A reopening market — and a redefined industry

After a long wait and many false starts, private equity GPs are quietly optimistic that 2026 could be the year deal activity finally cranks back into gear.

In recent years GPs have grown weary of predictions of upcoming “waves of M&A” that never materialize, but as the industry moves into a New Year, forecasts of a ramp up in buyout and exit activity feel more real.

Momentum has already been building rolling into 2026, with Q3 2025 global buyout deal value posting the best quarterly figures since the 2021 market peak. Global IPO markets are also simmering, with J.P.Morgan anticipating that up to a third of IPO activity in 2026 could involve private equity sponsors.

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Leveraged finance bankers, meanwhile, are betting big on a buyout bounce, having underwritten close US$65 billion of debt to finance big ticket buyouts in 2026, according to Bloomberg.

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Exits are back on

The reopening of the IPO window and a reenergized M&A market will offer private equity sponsors with a long-awaited opportunity to exit assets held for much longer than expected.

Global exit value was already up more than 80 percent year-on-year through the first nine months of 2025, and fully functioning IPO and M&A markets bode well for further gains in exit value in 2026.

A meaningful increase in exits can’t come soon enough for managers, who are sitting on 31,764 unsold assets, according to Ropes & Gray figures.

Clearing this backlog will be essential for a recovery in fundraising, which plumbed five-year lows for the Q1-Q3 period in 2025, according to PEI data.

Increasing distributions will help to clear liquidity bottlenecks and put fundraising timetables back on track in 2026. The good news is that 2025 may represent the bottom of the fundraising cycle, with fundraising moving into recovery mode in 2026, according to Cambridge Associates.

GPs may have heard it all before, but this time optimistic expectations do appear to be grounded in a degree of substance.

A new-look industry

But even if the mainstream portfolio company exit sluice gates do open up in 2026, there will be no going back to “business as usual” for private equity managers in the year ahead.

The cycle of rising interests and the associated exit logjam of recent years have changed the way the industry works for the long-term. The alternative liquidity routes managers and their advisers have devised and refined in recent years have become part of the industry establishment. GPs are not going to mothball these tools – even if IPO and M&A volumes bounce back beyond expectations.

Continuation vehicles (CVs), for example, now represent around a fifth of private equity distributions to LPs, and are not only a liquidity solution for downcycles, but a channel for retaining exposure to crown jewel assets through longer hold periods. Indeed, asset manager Schroders sees CVs potentially replacing sponsor-to-sponsor secondary buyouts in some scenarios.

For LPs, who will be invested across multiple funds and managers, a CV deal makes sense if the alternative is a secondary buyout sale to a fund that is also in an LP’s portfolio. For GPs with funds that are maturing, a CV allows them to hold onto prized companies, extend proven investment and portfolio management theses, and bring in capital and liquidity without having to sell to another private equity firm.

Private equity firms that haven’t yet implemented CV deals will have to start selecting some assets for CVs in the future. Managers that have executed CVs, meanwhile, will almost certainly do so again.

Increased use of CV funds is also bringing increased scrutiny. A recent New York Times analysis has highlighted growing investor focus on valuation transparency, governance and alignment in continuation vehicle transactions.

Just as exit options have evolved, so has fundraising. Non-institutional investment in private equity has well and truly arrived and will keep on growing in the next 12 months. A financial adviser survey led by private markets manager Adams Street found that more than two-thirds of respondents expected the percentage of their clients invested in private markets to increase during the next three years, while Bain & Co predicts that non-institutional capital will be one of the major drivers for private markets assets under management (AUM) growth during the decade to 2032.

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Global themes. Regional nuances.

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The overarching themes of an improving exit outlook, alternative liquidity options, and non-institutional capital will carry across all key private equity jurisdictions in 2026, but regional differences are also set to emerge. In the US, three interest rate cuts in 2025, a boom in AI-investment, buoyant stock markets, and highly supportive debt financing markets will put the US to retain its position as the most dynamic and active private equity market globally.

Europe also enters 2026 on the front foot. Inflation has stabilized and interest rates have come down, positioning private equity firms active in the region to build on the steady year-on-year gains in buyout and exit value posted in 2025. Europe, however, is not running as hot as the US market. Low growth and weak productivity are long-term issues that Europe is still grappling with.

Shifts in domestic policy in the US, however, have positioned Europe as a good option for private markets investors seeking to diversify US exposures. European leveraged buyouts have also consistently traded at lower multiples than in the US in recent years, according to CVC, providing ongoing attractive relative value for dealmakers.

Asian private equity dealmaking and fundraising, meanwhile, is set to take on a more domestic hue, with deal activity shaped by specific themes in local markets.

In the key China market, for example, which has had to navigate less predictable US-China relations in 2025, local Chinese firms and pan-regional funds look set to drive activity and take advantage of very strong IPO markets for exits and attractive entry multiples on new deals.

Japan, by contrast, is expected to see sustained interest from global players as corporate reform sees large Japanese conglomerates unbundle non-core assets and streamline operations, filling the pipeline of prospective carve-out deal opportunities.

A buoyant IPO market in India, supported by local pools of capital, meanwhile, is set to continue supporting a positive backdrop for private equity exits, which climbed to close to US$20 billion through the first nine months of 2025 – ranking 2025 as the second-best year for India exit value with a quarter of the year still to go.

Adapting to change

A wider range of exit options and the rise of non-institutional investment in private markets will demand that managers across all jurisdictions lay down new rails to run their businesses.

In addition to managing close-ended institutional funds, private equity firms will also have to operate the evergreen fund structures that continue to gain popularity as a conduit for private wealth into private equity. This will come with additional reporting obligations, the publication of more regular NAV marks, and the monitoring of liquidity sleeves. Managers will also increasingly be expected to update LPs in institutional funds about how investment resources and deals are allocated between institutional and evergreen funds. Adams Street notes that the number of evergreen funds doubled to 520 vehicles in the five years to the end of 2024. Private equity operations will have to be primed to respond to this growth.

LP expectations around the granularity and frequency in investor reporting will also see a broader step change in the year ahead. A Ropes & Gray industry survey of European LPs and GPs, for example, found that more than a third of LPs (36.6%) see transparency and reporting, and insufficient or delayed data sharing and communication, as the biggest source of tension in LP and GP relationships. In an increasingly competitive market, GPs will have to step up and address these concerns.

As a new dawn beckons for the private equity industry in 2026 – laying the necessary operational foundations will be essential for seizing the opportunity.

Conclusion

Private equity enters 2026 at a genuine turning point. Exit markets are reopening, liquidity options have broadened, and new sources of capital are reshaping the industry’s growth trajectory. Yet this is not a cyclical reset to old norms. Structural changes in exits, fundraising, investor composition, and fund structures are now firmly embedded in the private markets ecosystem.

For GPs, success in the year ahead will depend not only on capturing renewed deal and exit momentum, but also on evolving operating models, governance frameworks, and reporting capabilities to meet higher investor expectations. Those firms that adapt early and invest in scalable, resilient infrastructure will be best positioned to convert improving market conditions into durable long-term advantage.

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Private Credit:
2026 Outlook

Private credit enters a more competitive phase

After a prolonged period of rapid expansion, private debt enters 2026 from a position of strength, but into a more demanding operating environment. The asset class remains well capitalized, institutionally embedded, and attractive to investors seeking resilient income, yet the conditions that powered recent outperformance are beginning to evolve. As interest rates ease, competition intensifies, and deal dynamics shift, private credit managers will need to adapt their strategies, geographic focus, and operating models to sustain performance in the year ahead.

From growth tailwinds to competitive pressure

The private debt market has been on a good run and enters 2026 well-capitalized and full of confidence.

For the last ten years private credit assets under management (AUM) have grown at around 15% a year and the asset class has delivered better returns than syndicated loans, high yield bonds, and investment grade debt, according to J.P. Morgan. There has certainly been much for the private debt community to celebrate – but 2026 will bring new challenges.

No time for complacency

As strong and well-positioned as private debt managers are going into the New Year, this is no time for the industry to rest on its laurels.

In 2026 managers will be operating in a different market. Interest rates in the US, Europe, and UK have come down during last 12 months, and just as higher base rates benefitted the floating rate structures of private credit loans, falling rates will mean lower coupons.

Coupons will also be squeezed as margins narrow in the face of increasing competition for deals. Patchy M&A has constrained the supply for new financing opportunities, and when transactions have come to market, competition has been fierce.

M&A markets are expected to improve, but it will take time to bring the supply of deal financing back in balance with demand. Until then, private credit managers will have to keep narrowing margins, offering higher leverage multiples, and loosening covenants to remain competitive.

The asset class will continue to present attractive risk-adjusted returns for investors in 2026, but overall returns are expected to temper in a more crowded market.

Horizons new

Moving into new geographies will be one way that private credit managers respond to shifting industry dynamics.

North America is by far the largest private credit market in the world, with AUM of around US$1.5 trillion, according to Barings. It is twice the size of the European market and multiples bigger than the APAC market.

As the biggest private credit ecosystem, North America is also the most mature and competitive, and it has been an obvious move for managers to look to new jurisdictions to grow their businesses and secure optimal returns.

Europe, for example, has offered private debt providers with wider margins, lower leverage multiples and more lender friendly covenants than in the US. Private debt lenders have been able to leverage country-specific know how to price their debt at higher spreads and on better terms in a European market that – unlike the US – is still characterized by a patchwork of country-specific regulation and legal frameworks.

The APAC market, meanwhile, is at the start of a long-term growth trajectory, with Barings noting that bank credit still accounts for more than 70% of credit provision in the region, versus just 32% in the US and 50% in Europe.

Over time, however, APAC is expected to see private credit market share increase as more global private equity sponsors, who are familiar with the private credit offering, pursue more Asian deals.

Private credit managers and investors will be looking at ways to broaden their regional exposure and take advantage of the attractive pricing and growth dynamics beyond the core US market.

Asset-based finance to the fore

The other main lever that private debt managers will pull in response to intensifying competition in direct lending will be to launch new products.

Asset-based finance (ABF), an umbrella term for lending secured against a specific pool of assets, rather than borrower cashflows, has been a popular option for private debt firms expanding their platforms. The ABF market is also on the LP agenda, with analysis from law firm Macfarlanes reporting a growing number of LPs with ABF investment mandates.

The ABF market is worth around US$6 trillion and is forecast to expand by 50% to reach US$9.2 trillion by 2029, according to KKR. This presents a vast addressable market for private debt firms to grow into, as well as a wide selection of different asset pools to invest behind, ranging from credit card and auto loans through to aircraft leases, accounts receivable and royalties, to name but a few.

Private debt firms will be scouring the ABF market in increasing numbers in 2026 as they seek out opportunities to expand their franchises.

Fit for purpose

A priority for managers with ambitions to launch into new geographies, or branch out into ABF, will be to ensure that their organizations have the required operational muscle to support these new strategic objectives.

Expanding into Europe or APAC, for instance, will require support on the ground in these markets to steer through legal, regulatory, reporting and commercial nuances. When launching an ABF strategy, the operational ask will be even bigger. Private credit firms will have to build new infrastructure to monitor asset registers, review asset valuations, service collateral, model downside exit scenarios and manage credit risk.

Private credit players will seek to break new ground in 2026 – they will have to have the right back-office frameworks in place to realize the opportunities that lie ahead.

Conclusion

Private debt remains a compelling component of institutional portfolios as it enters 2026 but the next phase of growth will be more complex and competitive than the last. With margins under pressure, deal structures evolving, and managers expanding into new geographies and strategies such as asset-based finance, success will hinge on selectivity, discipline, and operational readiness. Firms that invest in scalable infrastructure, regional expertise, and robust risk management frameworks will be best positioned to navigate changing market conditions and convert opportunity into durable, risk-adjusted returns.

Real Estate:
2026 Outlook

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Real estate enters a recovery phase-with caveats

After several years of valuation resets, constrained transaction activity, and structural demand shifts across key sectors, real estate enters 2026 on a more stable footing. Lower interest rates, narrowing bid-ask spreads, and improving economic visibility are helping unlock deal activity and restore investor confidence. However, the recovery is uneven, highly segmented by geography and asset class, and shaped by persistent cost pressures and evolving demand dynamics. As conditions improve, investors and developers will need to navigate a market that offers renewed opportunity, but with greater complexity than in prior cycles.

From reset to re-engagement

For the first time in years, the real estate sector is back on the front foot.

Real estate has faced more than its share of headwinds since the pandemic, with climbing interest rates, shifts in office space usage post-lockdown, and declining demand for retail space combining to erode real estate asset valuations and put new investment on hold.

The tide is now finally turning. Interest rate cuts in the US, Europe, and UK, coupled with positive economic growth forecasts for Western and Asian markets, have seen commercial real estate valuations bottom out and transaction activity improve.

According to real estate investment firm LaSalle the three key conditions that real estate investors want to see before coming back to market in earnest – a realignment in pricing between real estate and other asset classes; an improvement in the supply-demand balance; and functioning debt capital markets – are now in place, and could signal the beginning of a new real estate investment cycle.

Regional themes

The anticipated recovery in real estate is a global theme, but the rebound will play out differently in different jurisdictions.

In the US the office segment posted its sixth consecutive quarter of positive net absorption (the difference newly leased space and the combination of vacated space and new space added to the market) in Q3 3025, as year-on-year vacancy rates declined for the first time since 2020, according to CBRE.

In the European market office vacancies have also come down, but unlike the US, this was mainly as a result of slower construction, rather than an increase in new leases, with net absorption rates still low, according to asset manager Aberdeen Investments.

European retail, by contrast, has been a top performer. Retail rents have increased at the fastest rate in 15 years and vacancies are coming down, according to Aberdeen. In the US, however, retail has been more complex. New leasing activity by the US’s three largest mall owners is up 20% on pre-pandemic levels, according to Cushman & Wakefield, but net absorption rates for 2025 did run into the red, as the impact of large retailer bankruptcies pushed up vacancies.

Industrials and logistics real estate in the US and Europe has proven resilient in the face of tariff and trade dislocation, with leasing recovering through the year following the “Liberation Day” tariff announcements.

Now that trade arrangements have settled, Cushman & Wakefield has increased its forecasts for US industrial real estate demand in 2026 and 2027 by 70 million square feet. In Europe caution still shadows the market, but occupier activity improved through the second half of 2026, with the defense and clean energy sectors driving demand for space. Cushman & Wakefield expects headline rents for logistics sites in most European markets to show steady gains in the next 24 months.

The real estate recovery in the Asia Pacific (APAC), meanwhile, has moved on a very different track to Western markets. Rising interest rates and trade uncertainty have impacted the APAC market, but the main focus for investors has been to plot a way through the ongoing fallout from a Chinese real estate liquidity crunch that has pushed a number of large Chinese developers into financial distress and slowed capital flows from China into other Asian real estate markets.

Moving into 2026, APAC sentiment is improving, although investors and developers remain cautious. The Chinese market remains challenging, but investors see value in developed urban centers including Tokyo, Singapore and Sydney, with India also presenting attractive growth dynamics, according to PwC and the Urban Land Institute. Rental housing and senior living are seen as the most attractive real estate segments in the region, but office, retail and logistics also present opportunities.

Data center drive

The one real estate segment that has barely skipped a beat through the challenges that the wider sector has encountered is data centers. JLL figures show that while forecast completions across all other real estate categories, in all main jurisdictions, will be down in 2026 versus the 2021-2025 period, data center completions will show increases of 20% in the US, 17.1% in Europe and 16.4% in APAC.

Rapid advancement in AI technology has driven huge demand for additional computing power, spurring huge upfront investment in data center capacity to meet forecast demand. McKinsey estimates that by 2030 investment in data centers will exceed US$1.7 trillion.

With close to a third of private real estate capital raised in 2025 dedicated to data center investment, data center development looks set to remain the fastest growing segment of the market in the year ahead, and a crucial driver of growth in real estate portfolios.

A more selective market

Moving into 2026, the real estate market will enjoy more stability but will remain a complex space for investors and dealmakers to navigate.

The underlying fundamentals for real estate investment are improving, but debt servicing costs remain elevated, as do construction and labor costs. Investors and developers are still highly sensitive to construction and fit out expenditure and will approach new build projects with caution. This will see the supply of new properties in key markets continue to decline in 2026.

Investors with existing exposure to high quality office, logistics and retail sites will benefit from high occupancy rates and rising rents. While recovering demand for space will open windows for deployment in new projects, new deals will have to be assessed with pragmatism and care.

Even the seemingly infallible data center segment will have to be approached with prudence, as stretched power generation capacity and grid bottlenecks pose long-term challenges for bringing new data center facilities online. There are also emerging concerns that an AI investment bubble could be forming, and any market correction in technology and AI stocks will impact data center capital expenditure. After a long winter, 2026 will herald a cycle of new opportunity in real estate but capturing it will require precision and discipline in selecting investment targets.

Conclusion

Real estate enters 2026 with momentum building, as improving macroeconomic conditions, lower interest rates, and clearer pricing signals support a gradual return of capital and transaction activity. Yet this is not a uniform rebound. Performance will remain differentiated across regions and sectors, with structural demand drivers – such as data centers and logistics – coexisting alongside ongoing challenges in office, construction economics, and energy infrastructure. Investors will approach the market with discipline, focus on asset quality, and account for operational and cost complexities will be best positioned to capitalize on the next phase of the real estate cycle.

Infrastructure:
2026 Outlook

Infrastructure enters a pivotal year

After a period of strong fundraising momentum and sustained investor demand, private infrastructure enters 2026 with its fundamentals intact but its investment landscape increasingly complex. Long-duration cash flows, inflation linkage and defensive characteristics continue to underpin the asset class, while structural demand drivers — from digital infrastructure to power generation and grid modernization — remain firmly in place. At the same time, shifting policy frameworks, asset-specific capacity constraints and questions around the durability of AI-led capital expenditure are reshaping how and where capital is deployed. The year ahead will test managers’ ability to balance opportunity with discipline.

Momentum, with conditions

As private infrastructure managers enter 2026, the investment case for the asset class looks stronger than ever. Private infrastructure funds have posted annualized returns of approximately 9% for the last two decades, according to Ares Wealth Management, outperforming equities and listed infrastructure. Good returns will boost investor appetite. Fundraising reached an all-time high in 2025, and momentum is carrying into 2026, with Infrastructure Investor anticipating a cluster of imminent fund closes in the coming months.

Data center drivers

As positive as the outlook for private infrastructure in 2026 may be, however, the next 12 months will also come with complexity and asset-specific headwinds.

The biggest question facing private infrastructure stakeholders will be whether the data center market – one of the single-most important drivers of infrastructure’s overall performance – can maintain momentum in the year ahead.

Across North America, Europe and the Asia Pacific, data center capacity has barely kept up with demand, with CBRE figures showing that vacancy rates are either flat or falling, even as data center inventories increase.

Huge sums of capital are set to keep pouring in the sector, with technology companies and hyperscalers planning to invest more than US$400 billion in new data centers to support rapid growth in AI. McKinsey expects to see more of the same for the rest of the decade, forecasting that capital expenditure on data center infrastructure will reach US$1.7 trillion by 2030.

There are, however, some concerns emerging that companies and consumers are not generating the returns from investment in AI that they expected. A Massachusetts Institute of Technology (MIT) study found that 95 percent of organizations were deriving zero return from investments in AI, while a McKinsey company survey found that the success rate of AI pilot projects was less than 15%.

If gains from AI investment are indeed taking longer than expected, the sustainability of current data center capital expenditure plans may have to be reappraised, which would have direct implications for the data center investment case.

Any kind of correction in AI valuations will not only impact data center infrastructure investment, but also associated infrastructure segments that have been buoyed by the data center boom.

The power sector is a case in point. Electricity consumptive data centers have driven up power demand and pricing. In the US alone data centers have combined capacity of 51GW, representing five percent of US peak demand, and S&P Global Energy anticipates that a further 44GW of additional capacity will have to come onstream by 2028 to meet the additional power demand from new data centers.

Any shift in AI sentiment would have a far-reaching ripple effect on the power sector at a time when power companies are also having to focus more on energy security and adapt strategic shifts away from global energy supply chains in favor of domestic sources.

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Renewables to remain relevant

Renewable energy is another infrastructure category that faces complexity and uncertainty in the year ahead.

In the summer of 2025, the US passed legislation bringing forward the cut-off for renewable energy project tax credits by five years to 2027, and more recently leases for US offshore wind projects on the Eastern seaboard have been put on ice, with authorities citing security risks for the decision.

The US administration is pivoting away from renewables in favor of encouraging hydrocarbon exploitation, upending green energy investment strategies. The US shift is also driving a wedge between the US and Europe on green energy policy, with Europe continuing to prioritize investment in energy transition and decarbonization.

Despite the US about-turn on renewable energy policy, the sector will continue to present investment upside for managers who can adapt to regulatory change. The International Energy Agency (IEA) calculates that investment in renewables is outpacing investment in hydrocarbons by a ratio of 10 to 1. Accelerating power demand, not just from data centers, but also from residential and industrial consumers, will also mean that policymakers can’t be too picky about where their power comes from.

There is likely to be a renewable energy shakeout as US tax credit provision winds down earlier than expected, but battery storage, wind, and solar will remain essential contributors to meeting rising electricity demand.

Investment required

Data centers and renewables may generate the headlines and talking points in private infrastructure in 2026, but the infrastructure story will extend well beyond these segments of the market.

The reality is that global infrastructure requires urgent modernization and investment. Roads, bridges and water systems are approaching the end of their operational lifecycles, and even before the spiking demand as a result of AI, electricity grids require efficiency upgrades and investment in additional capacity.

Private infrastructure managers have an essential role to play in financing this cycle of reinvestment, and helping to address and infrastructure financing gap that is expected to mushroom to US$15 trillion by 2040 unless investment ramps up significantly from current levels. Private infrastructure has grown and matured, and has gained the scale to help close this investment gap. Private credit assets under management (AUM) now sit at a record high of US$1.3 trillion, according to Boston Consulting Group, and additional buckets of liquidity to support investment are accumulating in the growing infrastructure debt and infrastructure secondaries markets.

The risks and costs of delaying infrastructure investment can’t be pushed back for much longer. The American Society of Civil Engineers believes that if underinvestment is not addressed, the US economy alone could miss out on US$10 trillion of GDP by 2039. Financially stretched governments will be hard pressed to cover the costs of infrastructure upgrades alone. Going into 2026, private infrastructure is well-equipped to lend a hand.

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Conclusion

Infrastructure remains one of the most compelling long-term investment themes as the global economy confronts rising power demand, aging assets and the need for large-scale modernization. In 2026, capital will continue to flow toward data centers, power generation and essential networks, but returns will be increasingly shaped by policy divergence, capacity constraints and the sustainability of AI-driven demand assumptions. With public funding insufficient to close the widening infrastructure investment gap, private capital has a critical role to play — but success will depend on careful asset selection, regulatory awareness and the ability to adapt strategies as conditions evolve.