Article

Alternative opportunities: Outlook for private credit, private equity, real assets, and hedge funds

22 May 2025
Invesco
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.

With elevated downside growth risks, high equity valuations, and benign capital markets activity, we’re remaining  neutral on how we’re allocating risk within our alternatives portfolio in the second quarter of 2025. In general, we’re more defensive, favouring private debt and hedged strategies versus private equity. Here are key takeaways from each asset class. Read the complete Q2 report.  

Private credit: Overweight as spreads begin to widen in public markets

Jeff Bennett, CFA®, Head of Manager Selection Invesco Solutions

Ron Kantowitz, Head of Direct Lending, Invesco Private Debt

Charlie Rose, Global Head of Commercial Real Estate Credit

Deal flow remains challenged with recent activity well below the 2021 peak. The leveraged buyout (LBO) environment is muted because large valuation gaps have kept many private equity deals on hold. Alternative lenders are poised for a robust year of loan origination due to a surplus of real estate debt dry powder and a continued pullback by banks. We remain constructive on the backdrop for direct lending because of macroeconomic and anticipated deployment tailwinds. Real estate credit remains our preferred way of accessing real estate markets.

Q2 private credit summary

 

Overall

Valuations

Fundamentals

Secular trend

Direct lending

Overweight

Neutral

Neutral

Attractive

Real asset credit

Overweight

Attractive

Neutral

Attractive

Alternative credit

Overweight

Neutral

Neutral

Attractive

Source: Invesco, Alternative Opportunities - Q2 2025, pg. 3

Private equity (PE): Underweight due to moderating valuations

Jeff Bennett, CFA®, Head of Manager Selection Invesco Solutions

Private equity faces headwinds in today’s environment. High interest rates will likely be balanced by lower public market valuations post-selloff. While uncertainty looms from tariffs, we believe a favourable regulatory environment for domestically oriented sectors within PE (such as those in the middle market) may provide some counterbalance.

Q2 private equity summary

 

Overall

Valuations

Fundamentals

Secular trend

Private equity

Underweight

Unattractive

Neutral

Neutral

Source: Invesco, Alternative Opportunities - Q2 2025, pg. 9

Real assets: Neutral as valuations approach trough and start to appear attractive in real estate

Jeff Bennett, CFA®, Head of Manager Selection Invesco Solutions

Mike Bessell, CFA®, Managing Director, Investment Strategist Invesco Global Real Estate

While cap rates remain muted relative to interest rate levels, we view real estate valuations as relatively attractive compared to public and private equity markets. After recent policy and sentiment volatility, the expected Federal Reserve cuts should be supportive of lending costs and cap rates.

Q2 real assets summary

 

Overall

Valuations

Fundamentals

Secular trend

Real estate

Neutral

Attractive

Neutral

Neutral

Infrastructure

Neutral

Unattractive

Attractive

Attractive

Source: Invesco, Alternative Opportunities - Q2 2025, pg. 18

Hedge funds: Overweight due to current levels of arbitrage spreads and central bank easing cycle

Jeff Bennett, CFA® Head of Manager Selection Invesco Solutions

After stock markets entered a technical correction, hedge funds with lower betas to market risk may be a valuable alternative within a portfolio. Spreads within event-driven strategies remain high due to the limited capital markets activity from mergers and acquisitions as private equity remains sidelined.

Q2 hedge funds summary

 

Overall

Valuations

Fundamentals

Secular trend

Event-driven and arbitrage

Overweight

Neutral

Neutral

Attractive

Systematic trend

Overweight

Neutral

Neutral

Attractive

Source: Invesco, Alternative Opportunities - Q2 2025 pg. 6

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Alternatives at Invesco

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 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.

Related Insights

  • 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 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 in USD and as of 20 May 2025 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.

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