9. Private markets: Unlocking liquidity and diversification opportunities

What we said
We anticipated that private markets would continue to offer attractive risk-adjusted returns in 2026, with opportunities across mid-cap buyouts, secondaries, private credit and infrastructure, emphasising that success increasingly relies on selecting top quartile managers.

How it has played out

Mid-market buyouts: specialisation and diversification in an increasingly concentrated market
Large buyout transactions have become increasingly difficult environments for generating excess returns. Competition for mega-cap assets is intense, purchase multiples are elevated, and value creation has become increasingly dependent on financial engineering and multiple expansion – both harder to sustain in a higher-rate environment.¹³ The mid-market, by contrast, offers managers greater scope to drive returns through operational improvement and earnings growth. Smaller and mid-sized businesses are typically less efficiently priced and more influenced by company-specific execution than by broader market dynamics.

The evidence is compelling: over the past 15 years, specialist private equity managers have consistently outperformed generalists,¹⁴ underlining the growing importance of manager selection. Diversified fund-of-funds strategies represent an efficient route to this opportunity set for investors seeking to reduce single-manager concentration risk.

Secondaries: liquidity-driven dislocation creates a compelling entry point
The secondaries market has evolved from a niche liquidity tool into one of the most attractive areas of private equity in our view. Historically dominated by LP‑led sales of existing fund interests at discounts, it now also includes GP‑led continuation vehicles, where managers roll portfolio companies into new funds and investors can either cash out or stay invested.

Several forces have accelerated growth:

• A prolonged slowdown in exits has sharply reduced liquidity, with distributions‑to‑NAV falling from an average of 29% (2014–17) to just 11% in 2024.¹⁵
• Many institutional investors are now over‑allocated to private markets and are using secondaries to rebalance.
• Continuation funds have become mainstream among leading buyout firms, helping retain ownership of high‑quality assets with further value‑creation potential.

For buyers, secondaries offer structural advantages: stakes are typically acquired at discounts to NAV (around 85–95 cents on the dollar for buyout secondaries), underlying assets are more mature so cash distributions arrive sooner, blind‑pool risk is lower, and a single allocation can provide diversification across companies, managers, vintages and sectors, often with lower fees than primaries.

The opportunity has sharpened in 2026 as several large US universities and endowments, including Yale (up to USD 6bn marketed)¹⁶ and Harvard, have explored secondary sales of private equity portfolios,¹⁷ creating access to high‑quality assets at discounted valuations.

Private credit: manager selection is everything
Private credit has attracted negative headlines, first as a ‘bubble’ and more recently over higher-than-expected default rates and the gating of semiliquid vehicles at certain large managers. The gating discussion deserves reframing: in an illiquid asset class, gates are a structural safeguard that protects investors from forced sales at distressed valuations, not an indicator of portfolio deterioration. The fundamental case remains intact. Attractive yields, floating-rate structures and senior secured positioning offer a compelling risk-adjusted profile relative to public fixed income, which the asset class has consistently outperformed through cycles.18 Direct lending also has one of the lowest correlations to global fixed income of any private credit strategy.¹⁹

Competition is compressing spreads and widening dispersion between managers. The “right” manager combines:

• Scale to originate proprietary deal flow,
• A robust platform for rigorous underwriting, and
• The discipline to walk away from marginal credits.

Private infrastructure: essential assets, renewed momentum
Private infrastructure has re‑emerged as one of the strongest areas of private markets in 2026. After two years of slower deal activity and higher rates, fundraising rebounded in 2025 and infrastructure AUM has reached around USD 1.6 trillion.²⁰

Momentum reflects both the defensive characteristics of the asset class and the scale of global infrastructure needs. McKinsey estimates USD 106 trillion of investment will be required globally through 2040, spanning traditional assets (utilities, transport) and newer segments such as digital infrastructure, data centres and power generation. AI‑driven demand for compute and electrification is further boosting interest in digital and energy infrastructure. Infrastructure continues to offer resilient, inflation‑linked cash flows and lower volatility than traditional private equity, reinforcing its role as a strategic long‑term diversifier.

Outlook for H2 2026
We expect private markets to remain an important source of return, diversification and liquidity solutions in H2 2026, but with a much stronger premium on manager selection and strategy mix than in the previous cycle. The combination of slower exits, higher financing costs and more volatile public markets is reinforcing the advantages of mid‑market buyouts, secondaries, private credit and infrastructure over large, highly levered buyouts.

In buyouts, we see the opportunity set continuing to favour specialised mid‑market managers that can drive operational improvement and earnings growth, rather than relying on multiple expansion. Performance dispersion between strategies and managers is likely to stay wide, making access to top‑quartile specialists – often via diversified fund‑of‑funds – a key driver of outcomes.

The backdrop for secondaries remains particularly attractive in our view. Liquidity needs among over‑allocated institutional investors, combined with a still‑muted exit environment, should keep deal flow high and discounts to NAV available on quality assets. We expect secondaries to continue growing faster than primary private equity, offering investors a way to deploy capital into more mature portfolios with lower blind‑pool risk and earlier distributions.

In private credit, we anticipate continued growth but also further polarisation between platforms. Higher‑for‑longer rates and tighter financial conditions will test underwriting standards, rewarding managers with scale, robust credit processes and the discipline to avoid marginal deals.

Private infrastructure should remain a core beneficiary of structural trends. The need for investment in energy transition, digital infrastructure and AI‑related power and data‑centre capacity supports a strong multi‑year pipeline, while the asset class’s inflation‑linked cash flows and lower volatility versus traditional private equity underpin its role as a long‑term portfolio stabiliser.

Overall, we see H2 2026 as a favourable environment for investors who can be selective: leaning into secondaries, high‑quality private credit and infrastructure, and accessing specialised mid‑market buyout managers rather than chasing scale in mega‑buyouts.

¹³ McKinsey & Company, Private equity: Clearer view, tougher terrain, Global Private Markets Report 2026 (February 2026).
¹⁴ McKinsey & Company, Private equity: Clearer view, tougher terrain, Global Private Markets Report 2026 (February 2026).
¹⁵ Bain & Company, Global Private Equity Report 2026.
¹⁶ Hannah Zhang, “Yale sells up to $6bn of its PE portfolio amid federal funding challenge,” Secondaries Investor, 17 April 2025.
¹⁷ Mary McDougall, Sun Yu and Antoine Gara, “Ivy League endowments sell private equity stakes amid buyout downturn,” Financial Times, 19 May 2025.
¹⁸ McKinsey & Company, The next era of private credit-
¹⁹ Preqin, Private Credit – Correlation Analysis.
²⁰ Boston Consulting Group, Infrastructure Strategy 2026: A Year of Increasing Scale and Diversification.