Private assets: balancing opportunities, risks and resilience

Balancing Opportunities, Risks and Resilience

The economic environment remains marked by persistent geopolitical uncertainties, recently exacerbated by tensions in the Middle East and their impact on energy prices, in a context where global value chains continue to reconfigure. The pause in monetary easing cycles, driven by inflationary risks, is sustaining elevated volatility and amore pronounced risk aversion.

Private equity is evolving in a contrasting environment, characterized by a gradual but uneven recovery. Following a rebound in 2025, the beginning of 2026 highlighted the market’s sensitivity to exogenous shocks, with a slowdown in transaction activity and continued challenges in fundraising. Valuations remain elevated but increasingly differentiated, while value creation relies more on operational performance. Exit conditions are gradually improving, while the secondary market is becoming a key liquidity management tool. Venture capital remains concentrated on structurally attractive themes such as artificial intelligence, energy transition and life sciences.

Private credit, while still offering attractive yield, is operating in a more uncertain environment. Higher rates continue to support carry, but are accompanied by a gradual deterioration in certain risk indicators. Stress observed in selected U.S. issuers and concerns around the liquidity of certain retail vehicles have reignited questions about the asset class. By contrast, the European market appears more resilient, supported by a more institutional investor base, although selectivity remains essential in a context of increasing dispersion.

Infrastructure valuations have stabilized and remain broadly in line with historical averages. The asset class continues to benefit from favorable structural trends, particularly linked to the energy transition and the development of digital infrastructure. The mid-market segment continues to offer attractive entry points, while infrastructure debt maintains a compelling risk-return profile.

Real estate markets are showing some signs of recovery, with transaction activity gradually picking up. But the momentum remains fragile and closely tied to the path of interest rates. Trends are still uneven across segments: healthcare, specialized residential and data centers continue to benefit from strong structural tailwinds, while hospitality is stabilizing and retail momentum is moderating after its recent rebound. Logistics is facing softer fundamentals, while the office sector continues its gradual rebalancing.

Private Equity

PE market is undergoing a gradual but uneven recovery, with notable divergences across fundraising, deal activity, and exit dynamics.

European PE entered 2026 with strong momentum, quickly disrupted by the Iran conflict in late Q1. Deal value and deal count felt significantly over the period. Rising energy prices, driven by the Strait of Hormuz tensions, have pushed inflation risks higher and left central banks on hold, shifting sentiment toward risk-off.

Fundraising remains challenging, reflecting a second consecutive year of subdued activity and remaining well below the 2021 peak. Capital continues to concentrate among the largest and most established managers, while fundraising timelines have lengthened significantly, highlighting a clear “flight to quality”.

In contrast, dealmaking and exit activity rebounded strongly in 2025. Global private equity Deal activity rebounded to near-record levels and exit value were supported by a reopening of IPO markets and a sharp increase in exit volumes, particularly in large-cap transactions. However, despite this recovery, distributions to LPs remain below historical norms, and a significant backlog of unsold portfolio companies persists, reflecting the slower normalization of liquidity conditions.

Valuation dynamics continue to adjust to a higher interest rate environment. Entry multiples have modestly recovered, with median buyout purchase multiples reaching approximately 11.8x EBITDA in 2025 (source McKinsey – Global Private Markets Report 2026), up from 2024 levels but still requiring stronger operational performance to sustain returns. On the exit side, top-quartile assets continue to command historically elevated valuations, while dispersion across assets has increased. In the European mid-market, valuation pressure remains more pronounced. The Argos Index declined to 8.3x EBITDA in Q4 2025, its lowest level in over a decade, reflecting pressure from higher long-term interest rates, tighter financing conditions, and increased macroeconomic uncertainty.

Looking ahead, the outlook is cautiously constructive. The environment is structurally more demanding: value creation is increasingly driven by operational performance rather than financial engineering, and leverage discipline remains critical.

The current market environment favors larger, high-quality assets and companies with strong domestic positioning and pricing power. In this context, successful sponsors are those able to combine disciplined underwriting with active value creation capabilities, particularly through operational improvements and digital transformation initiatives. At the same time, secondary markets continue to expand, driven by liquidity needs and portfolio rebalancing, becoming an increasingly central component of the private equity ecosystem.

Looking across strategies, buyouts remain the dominant segment, supported by sustained demand for mid-market transactions, while venture capital activity is increasingly concentrated in high-growth themes such as artificial intelligence, climate and energy transition, and life sciences, reflecting a more selective and innovation-driven investment landscape. Secondaries have become a structural pillar of the market, driven less by opportunistic arbitrage and more by a growing need for liquiditymanagement in a constrained exit environment.

Private Debt

Private credit remains an attractive alternative to public corporate bond markets, offering a significant illiquidity premium. Rising interest rate dynamics, driven by the blockade of the Strait of Hormuz, despite the prospect of slowing global growth, can provide investors with additional performance, as private credit market is mainly floating-rate. Traditional bank lenders remain constrained in their direct financing capacities, leaving more room for private players to finance companies. However, the boom in private credit (global outstanding of USD 2.2 trillion, compared to only USD 100 billion in 2010, sources: Bank for International Settlements 2025 and IMF 2024) has raised concerns within the U.S. administration, given a regulated banking system considered too restrictive, and could lead to regulatory easing as presented by the Secretary of the Treasury in December.

Although the Direct Lending strategy remained at the forefront of private debt allocations in 2025, there has been a renewed interest in more opportunistic and riskier strategies, such as Distressed and Specialty Finance (like Asset-backed Financing strategies). Fundraising activity in 2025 remained dynamic with a 7th year of fund raising exceeding USD 200 billion/year. Valuations are near their peaks. Similar to listed bonds, spreads have tightened but yields remain high.

However, 2026 began with a less favorable outlook for the asset class, with a slowdown in fundraising. Defaults observed mainly in the US on specific issuers (cases of alleged fraud since last fall and more recently restructuring cases involving creditors control) combined with concerns about the robustness of the SaaS software sector (well-represented in portfolios) in the face of disruption by AI have led to strong quarterly redemption requests on US Retail vehicles (BDCs) which activated their quarterly gates, questioning the GPs' ability to ensure sufficient liquidity and reviving the specter of the 2008 Subprime crisis. We share the analysis published at the end of May by the ECB concluding that Private Credit is not systemic at this stage, as it is largely dominated by institutional investors engaged in a patient capital approach, less sensitive to the nervousness fueled by media coverage of the asset class in recent months. Balance sheet exposure remains measured (around 5%, EIOPA 2024), and valuations have not suffered massive downgrades, with the credit quality of the market remaining sound. The deterioration of leading risk indicators (covenant breach rates in the US market at 3.1% in Q1, source: Lincoln Lens - Private Market Intelligence, and the addition of interest-capitalization clauses during the life of loans) in the private credit market, mitigated by historically high recovery rates, has nevertheless tempered our expectations for the asset class in 2026.

Geographically, we prefer European funds and issuers over their American counterparts. Maintaining selectivity between sectors (favoring a good level of sector diversification) and structures (with a preference for the most senior tranches / and deals with robust covenants), and selecting GPs with a strong focus on credit analysis seem essential for capital preservation in an environment where performance dispersion is expected to increase significantly.

Infrastructure

Capital raising in infrastructure reached record levels in 2025, reflecting sustained demand for defensive and inflation-resilient assets. Approximately $300 billion was raised in 2025, and the fundraising momentum could continue to strengthen in 2026 as investors increasingly allocate more to infrastructure within their overall portfolios. Investment continues to rise in 2025, it surpassed $1.5 trillion (Infrastructure Investor, Q1 2026) . This is supported by both political priorities and structural trends. As cloud computing and AI accelerate data center construction, digital infrastructure remains the crown jewel within Private Infrastructure.

North America was the primary beneficiary of this favorable momentum, recording a 50% year-on-year increase in investments in 2025, rising from $400 billion to $600 billion, with digital infrastructure representing 26% of the total transaction flow (CBRE, Q1 2026). Energy is also a significant contributor to deal activity. Europe continues to dominate the global renewable energy deal flow, while North America remains at the forefront of activity in Telecommunications (Preqin, 2025).

After peaking in 2022, transactions multiples valuations have stabilized around their historical averages. Mid-market valuations remain attractive. This market segment operates in a less competitive deployment environment than large-cap, allowing for the acquisition of assets at relatively lower valuation levels. Infrastructure debt remains attractive in terms of both yield and risk, thanks to low default rates and strong recovery rates.

Real Estate

Real estate market confirmed its resilience with the best first quarter in five years in terms of transaction volume. In Europe, transaction volumes increased by 13% year-on-year reaching €52,6 billion in T1 2026 (according to CBRE Research), signaling a renewed appetite from investors. This recovery in transactions has been largely driven by two key markets: Spain, which benefits from tighter credit spreads and the Netherlands where the occupier market offers attractive conditions. In prime locations, most submarkets experienced scarcity which is driving rents up. However, the different asset classes within this segment have shown contrasting trajectories and the impact of the current geopolitical crisis on interest rates creates uncertainties.

The European healthcare sector still stands out as the main growth driver, supported by defensive fundamentals (high occupancy rates, long leases, rent indexation), demographic pressure and the aging of the population. The hotel and residential segments (in particular student and senior housing) each recorded a 13% increase in volumes.

The living sector’s momentum is driven by a desiquilibrium between demand and supply which maintains pressure on prices and rising rents. As for the hotel sector, it is stabilizing with investors preferring prime hotels in the luxury segment. RevPAR is growing faster than occupancy rates, the sector’s performance seems more driven by prices than occupancy.

Retail, despite its rebound at the end of 2025, saw its momentum slow down with investments stabilizing. However, its fundamentals remain solid with stable leasing activity, an extension of store openings and good visibility of consumer trends. In contrast, Data Centers still show a good momentum due to the massive development of AI and the persistent strong disequilibrium between demand and supply which could lower the vacancy rate in the next months.

The office segment remains one of the most dynamic, with prime rents still rising and a positive global net absorption for the fourth consecutive quarter, driven by Asia Pacific. The market regains its balance after the post-COVID years even if we are not seeing a massive return to office in Europe, with vacancy rates still too high but which could come down below 7% by the end of 2030 according to CBRE. The logistic segment sees its fundamentals weakening with vacancy rates rising and investors’ confidence dropping given the actual economic context.