Alternative opportunities: What’s the outlook for private credit, private equity and real assets?

alternative opportunities quarterly outlook

Alternative Opportunities is a quarterly report from Invesco Solutions. In each new edition, we look at the outlook for private market assets. In particular, we focus on private credit, private equity, real estate, infrastructure and commodities.

Alternative asset positioning based on valuations, fundamentals, and secular trend, across and within:

Private credit

As we look to 2024, our view for direct lending is that the backdrop supporting a more favorable transaction environment is firmly in place relative to 2023, including better visibility into the macro environment, softening inflationary pressures, potential rate reductions and heightened pressure from LPs for private equity firms to generate realizations and invest in new platform companies. Within distressed debt and special situations, we are seeing a significant amount of liquidity-constrained small caps that are “good companies” with “bad balance sheets”, providing an expanded opportunity set for the asset class.

Private equity

With record levels of dry powder now four years or older, depressed debt coverage ratios, and a looming refinancing wall, opportunities should present themselves for managers with turnaround experience in an environment where General Partners (GPs) are highly incentivized to ramp up purchase activity. While still at valuations that exceed pre-2021 levels, the correction in late-stage venture valuations should provide a continued opportunity for private equity firms with a flexible mandate.

Real assets

Despite a subdued transaction environment, many real estate markets continue to see robust income fundamentals. We note that leasing has slowed broadly across property types in the US, where we expect the recovery in fundamentals to lag the capital markets recovery. Within infrastructure, while dry powder remains elevated, and valuations, like those in real estate, have not backed up with base rates, near term fundamentals are strong and secular tailwinds are supportive. Commodity prices remain volatile and rangebound across most sub-complexes.

Figure 1. Asset classes we favour
Asset classes we favour

Source: Invesco Solutions, views as of Feb. 29, 2024.

Download the report

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    Alternative opportunities: 2024 Outlook

    By Invesco

    Read our analysis and take a look at our summary dashboard across key alternative asset classes.

Frequently asked questions

A broad range of investments fall into the ‘alternatives’ asset class, including real estate, private credit, private equity, infrastructure and hedge funds. The asset class is growing, as investors continue to turn to alternatives for diversification and to navigate challenging market conditions.

Alternative assets often behave differently to public market assets like equities and bonds. Their unique characteristics mean that they can help investors achieve a diversified portfolio. Typically, they also generate higher returns than public market assets. 

We manage over $177 billion (as of 30 September 2023) in alternative strategies, spanning private credit, real estate, private equity and beyond. We share some highlights below:

  • Real estate: Invesco Real Estate is a global real estate manager, with local people on the ground in 21 offices worldwide. We invest across the risk-return spectrum, from core to higher returning strategies. Our expertise covers public, private, equity and debt capabilities.

  • Private credit: Invesco Private Credit is one of the world’s largest and longest-tenured private credit managers. We pursue opportunities across broadly syndicated loans, direct lending, distressed debt and special situations.

  • Private markets platform: Invesco Investment Solutions offers a private markets platform, which streamlines the process of investing in alternative assets. Alongside Invesco’s in-house capabilities, it provides access to partner firms with expertise in private equity, private credit, real estate and infrastructure.

Investment risks

  • The value of investments and any income will fluctuate. This may partly be the result of exchange rate fluctuations. Investors may not get back the full amount invested.

    Alternative investment products may involve a higher degree of risk, may engage in leveraging and other speculative investment practices  that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.

Important information

  • All data is provided as at 29 February 2023, sourced from Invesco unless otherwise stated.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

    Views and opinions are based on current market conditions and are subject to change.