The Alternative Outlook for 2026

According to our latest survey of institutional investors, the biggest reason institutions are concentrating on private assets is the perceived return potential in exchange for less or no liquidity, which 65% say is higher than public markets¹.

The prospect of higher returns is attractive for other types of investors too. Having long been the preserve of institutions and High Net Worth individuals, Julien Dauchez, Head of Client Solutions Group at Natixis Investment Managers, is certainly seeing the trend reflected across client portfolios.

He said: “Access to private market investing has changed with the arrival of open-ended funds over the past few months. The expected rise in IPO² and M&A activity in 2026³ may de-congestion private equity markets, and act as a catalyst for individual investors in search for diversification and new sources of return.”

Of course, the illiquidity premium of an unlisted asset is not guaranteed, so each segment (private equity, infrastructure, private debt, real estate) should be approached separately and with caution, and expert advice is always recommended.

We asked our private assets investment professionals from across the Natixis Investment Managers’ affiliate family for their outlook for the asset class over the next 12 months.⁴

Private assets

Philippe Faget, CAIA
Head of Private Assets
Vega Investment Solutions

“On private equity we see strong opportunities in the small and mid-cap segments. Valuations have adjusted, and there are still many high-quality businesses available at reasonable prices. We also like the secondary market: volumes are high, and secondary funds can provide liquidity while acquiring assets at discounts in some cases.

We are starting to see positive signs again in venture capital after a very difficult period. Higher rates and the repricing of growth hurt the sector, but now more attractive entry points are appearing, particularly in AI-related opportunities and healthcare, where innovation remains strong.

In private debt, we remain generally positive, especially in Europe. Fundamentals – refinancing profiles, covenant standards, regulatory frameworks – are generally more reassuring than in some US segments. In certain US pockets, covenant-lite structures and payment-in-kind features are more prevalent, which makes us more cautious.

We keep a watch on the micro indicators in private debt markets: default and recovery rates, PIK usage [Payment-in-Kind, which allows borrowers to defer cash interest payments until maturity], covenant trends [contractual promises in a loan agreement laying out the set of conditions that the borrower must adhere to, serving as legal protections for lenders], and evolving regulation around private credit and private funds.

On infrastructure, we are also positive – particularly essential services, renewable energy and data-centre infrastructure. Policy support in Europe and elsewhere, plus long-term secular demand, create attractive long-duration opportunities. Infrastructure debt, with its additional layers of security, is also appealing.

And in real estate we have been cautious for some time but have recently become more constructive. We like hotels, especially hospitality assets benefitting from travel recovery, as well as data-centre-linked real estate and selected retail segments where fundamentals have improved. The environment is still challenging, especially for highly leveraged or structurally impaired assets, but careful sub-sector and GP selection can uncover value.

On the risk side, however, we watch monetary policy, especially in the US and Japan, where the path is less clear than in Europe. Sudden shifts could impact valuations and refinancing conditions. Then there are the geopolitical risks and trade wars, which can hit infrastructure, logistics, real estate and global supply chains.”

Private equity

Eric Deram
Managing Partner
Flexstone Partners

“In 2025, the small and mid-cap private equity market showed signs of revival, with investment and divestment activity picking up and valuations holding steady. The secondary market is on track to surpass $200 billion in transactions, its largest tally ever. As we look ahead, the question remains: are we finally emerging from the liquidity drought that has defined recent years? 

We believe 2026 will mark both a recovery and a transformation for private equity. Exit volumes are set to exceed the 2021 peak, supported by falling interest rates and easing geopolitical risk. The reopening of the IPO window will add further momentum. Yet, despite this surge in activity, valuations are unlikely to improve meaningfully. General partners, under pressure to deliver liquidity, will be forced to sell assets at less-than-optimal prices, particularly as reliance on GP-led continuation vehicles moderates.

At the same time, the industry faces structural shifts. Fundraising will become increasingly polarized, with 40% of capital expected to flow to the ten largest firms. For smaller and mid-sized managers, survival will be difficult, and conferences may feel more like a scene from [Michael Jackson’s] Thriller than a celebration of growth. Zombie funds will proliferate, while “fundless sponsor” deals rise in prominence. Consolidation among the largest players is also likely, with succession challenges and the need for scale in retail markets driving mergers between two of the world’s top ten firms.

Technology will play a defining role. More than half of private equity firms are expected to appoint a Chief AI Officer, signalling the integration of artificial intelligence into both operations and investment processes. Whether or not an AI bubble exists, the efficiency gains and decision-making enhancements are too significant to ignore.

Finally, retail investors will continue to reshape the market. Evergreen semi-liquid products are gaining traction, appealing to both institutional and individual investors for their simplicity and liquidity profile. These vehicles will capture a growing share of private asset allocations, reinforcing the democratization trend already underway.”

Real estate

Hans Vrensen
Head of Research & Strategy Europe
AEW

“Vacancy rates across most core European property sectors showed a continuing downward trend post-Covid in 2025, triggering positive prime rental growth projections. Office vacancies are anticipated to peak at 8% by year-end 2025 before declining to 6% by 2030. Logistics vacancies have increased to nearly 6% from record lows three years ago. As supply reduces and re-balances in line with demand, logistics vacancy is expected to reduce to 4% by 2030. Our forecast indicates prime cross-sector rental growth averaging 2% per annum from 2026 to 2030, with prime residential markets leading at 3%, followed by offices and logistics. Conversely, high street retail and shopping centres anticipate below-average rental growth, highlighting cross-sector disparity.

Commercial real estate financing has become increasingly favourable, offering competitive costs to equity investors in the Eurozone, where borrowing rates stand at near 4% compared to cross-sector prime property yields of above 5%. Efforts by banks and debt funds to enhance access to financing have heightened competition and improved refinancing conditions. Despite France seeing a rise in its debt funding gap, most other countries like the UK, Spain, and Italy have maintained gaps well below the European average, indicating a varied landscape for the remaining challenge of refinancing legacy debt across nations.

Investment sentiment towards residential and logistics remains most favourable, but office and retail sectors are catching up. Together with an increase in capital raising, AEW projects this to lead to an increase in transaction volumes to reach €200 billion in 2025 and €220 billion in 2026. The narrowing of bid-ask spreads and a tightening of prime property yields indicate positive momentum.

The average all-sector total prime return in AEW’s base case scenario is projected at 8.4% pa for 2026-30 across all 196 European market segments covered. Notably, prime offices are forecast to have the highest total returns of 9.3% annually, with shopping centres following at 8.6%. Across countries, the UK market is poised for the highest average total return of 10.3%, driven by high current income yields, while CEE and Spanish markets are also forecasted to perform strongly.”  

Interviewed in December 2025

AEW, VEGA Investment Solutions and Flexstone Partners are affiliates of Natixis Investment Managers.