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Portfolio risk: Amid geopolitical and economic uncertainty, we remain neutral on how we’re allocating risk within our alternatives portfolio. Base interest rate reduction has paused and the oil shock from the Iran conflict is expected to increase inflation and long-term rates. We favor defensive assets, favoring private debt, real assets, and hedged strategies.
Private credit: We are still overweight direct lending as all-in yields remain attractive for senior positioning, especially in the core middle market. Significant private equity dry powder and a backlog of exits point to a continuation of recently improved deal activity. We are overweight real estate credit given high levels of current income and a recovering real estate equity market.
Private equity: We remain modestly underweight private equity (PE), but beneath the surface, we’re beginning to normalize our views on leveraged buyouts versus growth strategies. PE free cash flow yields have risen in Q1, bucking a trend we’ve seen since 2012 and improving relative to public equities. We continue to favor growth and venture strategies.
Real assets: We favor income-driven, lower-capital-expense sectors in core RE. We see higher-return opportunities in real estate credit and volatility-driven equity mispricing rather than broad market beta. Our infrastructure view is positive, supported by the correction in valuations, strong fundamentals, and powerful secular tailwinds.
Hedge funds: We believe hedge funds with lower betas to market risk may be a valuable alternative within a portfolio. Our view is still attractive towards hedge funds; however it is moderating as the capital markets reopen and outlook for equity markets improves.
Source: Invesco Solutions and Custom Strategies, views as of May 4, 2026. The opinions expressed are those of the author, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Investment risks
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations), and investors may not get back the full amount invested.
Alternative strategies may include investments in private equity, private credit, private real estate and infrastructure, which may involve additional risks such as lack of liquidity and concentrated ownership. These types of investments may result in greater fluctuation in the value of a portfolio. Private Market investments are exposed to risk, which is the risk that a counterpart is unable to deal with counterparty obligations. Changes in interest rates, rental yields and general economic conditions may result in fluctuations in the value of any underlying strategies. These types of strategies may carry a significant risk of capital loss and other market risks.
We are still overweight direct lending as all-in yields remain attractive for senior positioning, especially in the core middle market. Significant private equity dry powder and a backlog of exits point to a continuation of the recently improved deal activity, despite competition from the broadly syndicated market.
While we remain encouraged by the strength of the US economy and the pro-business stance of the new administration, a more cautious and measured investment approach is warranted.
Recently announced tariffs from the Trump administration have widened public spreads, which has yet to be reflected in the private markets.
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