Article Q3 Alternative Opportunities report

While fundamentals across private markets remain generally resilient, tightening credit spreads and elevated valuations in some growth-oriented segments have tempered our outlook. We remain neutral across most private market exposures, while continuing to favour real assets and hedged strategies. Our experts highlight opportunities in alternative credit, selective private equity segments, income-oriented real assets, and hedge fund strategies that may benefit from elevated rates and market volatility. (Read the complete Alternative opportunities Q3 insights)

Private credit: Neutral as credit spreads tighten

We’ve reduced our modest overweight in private credit to neutral as spreads have tightened across much of the market. Despite this, private credit remains an important funding source for businesses and real assets and continues to offer potential illiquidity and complexity premiums. Alternative credit, particularly venture debt, is our favoured strategy within the asset class.

Private equity (PE): Underweight due to moderating valuations 

We’ve upgraded private equity to neutral as free cash flow yields have improved relative to public equities and financing spreads remain supportive. We continue to favour growth and venture strategies, particularly early-stage opportunities where valuations appear more attractive. We also see continued interest in secondaries, although discounts have moderated from prior levels.

Real assets: Slight overweight as valuations approach trough, start to appear attractive in real estate equity

We remain slightly overweight real assets, including both real estate and infrastructure. In real estate, we favour defensive, income-oriented sectors and see opportunities driven by selective valuation dislocations. Infrastructure continues to benefit from strong fundamentals and long-term secular themes, particularly across digital infrastructure, power generation, and energy-related investments.

Hedge funds: Overweight due to current levels of arbitrage spreads 

We continue to view hedge funds favourably, particularly strategies with lower sensitivity to broader market movements. Elevated interest rates, attractive arbitrage spreads, and the potential for continued market volatility support our outlook. We still view hedge funds as attractive, but we may moderate that when capital markets reopen and outlook for stock markets improves.