“The private markets are currently navigating a highly challenging environment marked by significant volatility stemming from global conflicts, inflation, and interest rate rises,” said Martine Kerschenmeyer, Director - Limited Partner Services at Advent International, during the LPEA Insights Conference 2025 on 23 October 2025.

The macroeconomic factors that previously propelled the industry in the last decade—“fiscal stimulus, quantitative easing, and ultra-low interest rates—have largely flattened,” observed Pedro Alonso-Lamberti, senior portfolio manager at Allianz. He noted that the shift has led to a slowdown in private equity, characterised by a dislocation between older funds that committed rapidly and new funds that are struggling to raise capital, resulting in an “unprecedented backlog of commitments and unsold assets that are slowing the deployment of capital.”

Focus on operational value

To address this instability, Alonso-Lamberti explained that investors are recalibrating strategies to emphasise liquidity and certainty, often seeking lower duration and earlier exits. Infrastructure and private credit are highlighted as resilient asset classes, both offering improved cash flow predictability and reduced volatility. Private credit, in particular, has seen “spectacular growth.” Yet he stressed that “infrastructure benefits from strong alignment with government digitalisation and transition agendas.”

Furthermore, Alonso-Lamberti noted a strategic pivot toward secondaries and co-investments, which help recycle capital. He noted that investors are focused on disciplined underwriting and are demanding that General Partners (GPs) prioritise operational value creation and efficiency over relying on multiple expansion and leverage, a common approach in the last decade.

Bart van Dijk, managing director and head of Europe at the Institutional Limited Partners Association (ILPA) remarked that limited partners (LPs) reported to him an emphasis on a long-term approach (looking 10 to 20 years ahead) while they tend to maintain high portfolio diversification to withstand uncertain environments.

Retail investors: a challenge for GPs

Van Dijk considers the “democratisation” of private markets as a major structural seismic shift which helps compensate for what Alonso-Lamberti called the “flattening of institutional inflows” into the strategy.  While welcomed, panellists are concerned that the influx of retail capital creates a significant operational burden and complexity, necessitating careful governance, regulatory compliance, and education for a varied investor base.

Open architecture

Irina Barbuntoiu, portfolio manager, private debt at NN Group, noted that institutional investors, such as insurance companies, are simultaneously requesting greater flexibility through open architectures and customised solutions to meet specific needs like addressing regulatory requirements (e.g., Solvency 2020) or aligning with sustainability mandates. Alonso-Lamberti echoed her comment and noted a push for open architecture whereby internal and external products are offered not only to retail but “more and more” to institutional investors.

Balance GPs: generalists vs. specialists

Alonso-Lamberti thinks there is a clear trend toward the concentration of managers, with investors preferring fewer GPs with whom they maintain deep, strategic, and long-standing relationships. This is particularly evident in infrastructure, where 15 GPs concentrate 80% of new capital.

Consequently, he noted that the concept of “allocation as a service” is emerging, where firms advise clients on portfolio management to achieve specific goals, such as aiming for the “same yield but with reduced volatility.” Barbuntoiu and Van Dijk stressed that successful manager selection is highly reliant on both traditional metrics (hard skills) and critical “soft skills,” like proactive communication, delivery of insights, and fostering a true partnership model. “It's people's business,” Van Dijk said.

Barbuntoiu and Alonso-Lamberti noted that their portfolio construction typically balances global generalist managers (providing resilience) with specialist pure-play managers delivering “something unique,” such as in asset-backed financing where the business is easily scalable or a “performance kicker” to seize market momentum.