9. Private markets: Unlocking liquidity and diversification opportunities

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9. Private markets: Unlocking liquidity and diversification opportunities

Market opportunities

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9. Private markets: Unlocking liquidity and diversification opportunities

Assets under management in private equity and private debt have experienced rapid growth in recent years and are forecast to reach approximately USD11.9tn and USD2.6tn, respectively (Figure 13).*

However, the industry faces a persistent challenge: the slow return of capital to investors. This issue is driving a shift toward strategies that prioritise liquidity opportunities, diversification, and risk management. Diversified mid-cap private market portfolios, secondaries and private debt are emerging as key solutions, helping investors balance growth opportunities with the need for flexibility and resilience.

Mid-cap buyouts offer built-in diversification
Mid-cap buyouts could continue to shine in 2026 as a source of diversification, stability and potential high returns. These investments focus on medium-sized companies, which tend to have more attractive entry valuations and offer a larger variety of exit routes than larger deals. Mid-cap managers often rely on trade sales and secondary buyouts rather than IPOs, reducing their dependence on volatile public markets and smoothing the timing of exits. According to Preqin, mid-cap buyouts have delivered stronger annualised returns over the long term, outperforming both large-cap buyouts and the S&P 500.15

Diversification remains critical in private markets. By combining private equity, debt, infrastructure, and real estate, investors can spread risk and achieve more consistent returns. Mid-cap buyouts, in particular, offer a balanced approach, providing steady growth with lower volatility.

Secondaries have historically delivered strong returns
We believe the secondaries market is poised for significant growth continuation in 2026, driven by its ability to deliver strong returns while offering greater liquidity than traditional private equity. Secondaries provide diversification across vintages, strategies, and managers. This reduces concentration risk and enhances portfolio stability.

Over the past few years, secondaries have consistently outperformed primary private equity funds, potentially making them an attractive option for investors seeking both performance and reduced risk. Of course, past performance is no guarantee of future performance. For vintages from 2019 to 2022, Preqin data indicates that the secondary market achieved a higher median internal rate of return (IRR) by vintage compared to the primary market.16 Also, the transparency of secondaries – where investors can review underlying assets – adds another layer of confidence, setting them apart from ‘blind pool’ primary funds.

Looking ahead, the secondaries market will likely become the primary mechanism for liquidity in private markets. Investors could increasingly use secondaries to unlock capital from aging assets, reinvest in new opportunities and adapt to changing market conditions.

“ Investors could increasingly use secondaries to unlock capital from aging assets, reinvest in new opportunities, and adapt to changing market conditions. ”

Private debt has demonstrated consistent and stable returns
Private debt will remain a cornerstone of private market portfolios in 2026, thanks to its historical ability to provide stable, consistent returns. Additionally, private debt has generated annualised returns ranging from 7.5% to 10.8% over the past five years, outperforming the Morningstar LSTA US Leveraged Loan Index.17 As an asset class, private debt spans a spectrum of risk and return profiles, from senior secured loans to opportunistic debt. This flexibility allows investors to tailor their exposure based on their risk tolerance and return objectives.

One of the key advantages of private debt is its defensive nature. Floating-rate structures and collateralised loans help protect against downside risk while maintaining attractive yields. Private debt has also proven to be one of the most stable asset classes across market cycles, making it ideal for resilient portfolio construction. Managers with cross-market expertise will be best positioned to deliver hybrid credit solutions, simplifying access to the full credit spectrum.

Private markets will continue to evolve, driven by the need for liquidity, stability, and growth. Mid-cap buyouts, secondaries and private debt will play a central role in this transformation, offering investors the tools they need to navigate this high potential market. Success in private markets hinges on selectivity, focusing on strategies that align with long-term objectives while managing risk.

Crucially, the disparity of returns in private markets underscores the importance of selecting top quartile managers. Thus, leveraging the expertise of trusted advisors to identify and access these high-performing managers is essential to capturing the full potential of private markets. By embracing these trends and prioritising expert guidance, investors can position themselves for resilience and growth in the years ahead.

Action for investors:

  • Mid-cap buyouts, secondaries and private debt will play a central role in this transformation, offering investors the tools they need to navigate this high potential market.
  • The key to success will be selectivity, focusing on selecting top managers and strategies that align with long-term objectives while managing risk.

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