9. Private markets: Unlocking liquidity and diversification opportunities

Key takeaways

• Funding the power and AI infrastructure buildout: opportunity extends beyond data centres to power generation, utilities, grids, storage, power management, fibre and interconnection capacity.
• Private equity secondaries: buyers should test portfolio marks, the remaining upside, concentration, unfunded obligations and alignment.
• Private credit: favour managers with proprietary or relationship- led sourcing, disciplined underwriting and transparent valuations.

An important question for the year ahead is: where can private capital create value in 2027? We see multiple opportunities – in operational improvement, in solutions to the private-equity liquidity backlog and in the significant infrastructure needed to meet rising power demand. But private credit investing requires a different lens.

Recent redemption pressure has put the liquidity offered by some private markets funds under scrutiny. Across all three themes mentioned above, the entry price, manager skill and investment structure will all matter as much as the broader market trend.⁹

Middle-market buyouts and selective growth equity Cheap debt and rising valuation multiples have supported private equity returns for much of the past decade, but higher financing costs now constrain debt capacity, while elevated entry valuations and uncertain exit pricing make multiple expansion less reliable. This means returns will depend more on earnings growth and cash generation. To this end, we favour specialist middle-market managers with repeatable sector playbooks and the resources to strengthen leadership, sharpen commercial execution, improve procurement and working capital, and use technology to raise productivity. These levers can be especially effective in smaller companies with less-developed systems and management structures. Buy-and-build remains attractive where acquisitions add capabilities or market reach and integration drives earnings. Strategies reliant mainly on acquisition-multiple arbitrage are less compelling.^{9, 17}

Selective growth equity offers a complementary path to growth with less reliance on leverage. We favour businesses with established product-market fit, durable unit economics and a credible path to cash generation. Technology, including AI, can support the investment thesis where it delivers measurable customer value or productivity gains, but managers must also assess whether it could erode competitive advantages.

Entry valuation remains critical: revenue quality, customer concentration, margin progression and exit options should support a realistic downside case. Preqin’s latest survey points to improving expectations for private-equity performance, although exits remain a major concern.^{9, 16}

Private equity secondaries
The slow return of capital from older private-equity funds continues to create demand for liquidity. Secondaries allow investors to buy interests in existing funds or assets with more information about the underlying portfolio than is available at the start of a new fund. They may also shorten the path to distributions, although neither earlier cash flows nor a reduced J-curve is assured.^{9, 17}

The market is now large and competitive: Lazard estimates that Limited Partner-led and General Partner-led transactions together reached $124 billion in the first half of 2026. For 2027, the opportunity rests on asset selection and pricing, not on assuming every seller must accept a substantial discount. Buyers should test portfolio marks, the remaining upside, concentration, unfunded obligations and alignment; General Partner- led deals also require independent price validation and clear governance.¹⁰

Time to choose private credit selectivity over retreat The central test for private credit in 2027 is simple: can managers protect capital when borrowers come under pressure and investors seek liquidity? Recent redemptions in semi-liquid funds, elevated payment-in-kind interest and closer scrutiny of valuations point to widening differences between managers. This environment argues for selectivity, not retreat: Preqin reports that 27% of investors intend to commit less over the next year, yet almost 85% expect to maintain or increase their long-term allocations.^{9, 11, 12}

We favour managers with proprietary or relationship- led sourcing, disciplined underwriting and transparent valuations. Those strengths should be visible in the portfolio through resilient cash interest coverage, credible free-cash-flow conversion, prudent leverage and limited reliance on payment in kind (PIK). PIK can provide temporary flexibility, but repeated use may defer stress rather than resolving it. Fund terms also matter as periodic dealing does not guarantee liquidity, and gates can delay exits. ^{11, 12, 17}

Software deserves additional scrutiny because AI could reshape competitive advantages. Businesses with embedded workflows, proprietary data and strong customer retention may be better placed, while less differentiated applications may face lower barriers to entry and pricing pressure.

Credit secondaries and distressed strategies may benefit from market pressure, but only where discounts, documentation and workout capabilities justify the risk.^{12, 13}

Power and AI bring infrastructure opportunities
Private infrastructure is evolving from a predominantly income-oriented allocation into the physical backbone of a more digital and electrified economy. AI adoption, broader electrification and energy-security needs are increasing demand for reliable electricity and connectivity. The opportunity extends beyond data centres to power generation, utilities, grids, storage, power management, fibre and interconnection capacity. The International Energy Agency projects that global data centre electricity use will roughly double from 485 terawatt hours (TWh) in 2025 to 950 TWh in 2030, while J.P. Morgan highlights utilities and power assets as beneficiaries of rising demand.^{14, 17}

Although investment at scale is required, this does not guarantee attractive returns. We favour assets with a clear role in supplying power or connectivity, credible customers and disciplined financing. Power availability, grid queues, construction costs and entry valuations are especially important in data centre-related investments. Public funding alone is unlikely to meet these needs, creating a role for private capital where projects can be delivered on acceptable terms. However, the wide dispersion in returns reinforces the need for careful manager and strategy selection.^{15, 16}

Our view for 2027

Private market opportunities remain substantial, but holding broad exposure alone is unlikely to capture them. As markets evolve and the competition for attractive assets intensifies, the ability to identify and unlock value will become an increasingly important differentiator. In private equity, that means driving operational improvements and delivering growth; in secondaries, applying rigorous underwriting to assess value; liquidity management in credit and price discipline in infrastructure will determine which managers can turn these themes into durable returns.

Across all four areas, success will depend less on simply gaining exposure to compelling themes and more on the expertise, selectivity and judgement required to translate them into performance. Ultimately, these capabilities will distinguish the managers able to deliver durable returns from those that are merely participating in the opportunity.

For you as an investor, the message from Theme 9 is that private market opportunities remain substantial, but capturing them depends on manager skill, selectivity and structure rather than broad exposure alone. The points below translate this into concrete portfolio actions for the year ahead.

⁹ Preqin, Investor Outlook H2 2026.
¹⁰ Lazard, Interim 2026 Secondary Market Report, 13 August 2026.
¹¹ Financial Stability Board, Report on Vulnerabilities in Private Credit, 6 May 2026.
¹² Moody’s, Private Credit: Volatility Intensifies Focus on Liquidity and Transparency, 23 April 2026.
¹³ S&P Global Ratings, Private Credit: Insights into BDCs, Software Companies and Emerging Trends, 2026.
¹⁴ IEA, Key Questions on Energy and AI, 2026.
¹⁵ Preqin, Unlisted Infrastructure in 2026 and Why Selectivity Matters, 9 September 2026.
¹⁶ Preqin, Can Private Capital Help Europe Close Its Investment Gap, 25 August 2026.
¹⁷ J.P. Morgan Asset Management, AISS Alternatives Relative Value Outlook 3Q 2026.
¹⁸ Earnings before interest, taxes, depreciation and amortisation