
Real estate Private real estate debt: A strategic asset class for insurers
Private real estate debt offers insurers a way to diversify their portfolios, generate stable income streams, and match their long-term liabilities.
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.
Due to the combined impact of high stock valuations and the elevated cost of financing, we remain neutral on how we’re allocating risk within our alternatives portfolio. In general, we’re more bullish on defensive alternatives, favoring private debt, real assets, and hedged strategies versus private equity. Here are key takeaways from each asset class. (Read the complete Q3 Alternatives opportunities report.)
As market volatility subsides, we’re watching for signs of renewed mergers and acquisitions (M&A) activity. In the meantime, patient credit investors may continue to benefit from a favorable higher-for-longer rate environment. We’re overweight real estate credit due to the high levels of current income and the recovering real estate equity market.
|
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 – Q3 2025, pg. 5
We remain underweight private equity, especially traditional buyout strategies, which generally require leverage to generate returns. The combined impact of high equity valuations with an elevated cost of financing may be a significant headwind.
|
Overall |
Valuations |
Fundamentals |
Secular trend |
---|---|---|---|---|
Private equity |
Underweight |
Unattractive |
Neutral |
Neutral |
Source: Invesco, Alternative Opportunities – Q3 2025, pg. 14
We’re slightly increasing our exposure to real estate because our conviction that valuations have bottomed is beginning to form. While we’re optimistic amid easing financial conditions, we remain vigilant because of tight cap rates and a murky outlook from policymakers.
|
Overall |
Valuations |
Fundamentals |
Secular trend |
---|---|---|---|---|
Real estate |
Overweight |
Attractive |
Neutral |
Neutral |
Infrastructure |
Overweight |
Unattractive |
Attractive |
Attractive |
Source: Invesco, Alternative Opportunities – Q3 2025, pg. 23
Hedge funds with lower betas to market risk may be a valuable alternative within a portfolio, in our view. Spreads within event-driven strategies remain high despite limited capital markets activity from M&As because private equity has remained sidelined.
|
Overall |
Valuations |
Fundamentals |
Secular trend |
---|---|---|---|---|
Event-driven and arbitrage |
Overweight |
Neutral |
Neutral |
Attractive |
Systematic trend |
Overweight |
Neutral |
Neutral |
Attractive |
Source: Invesco, Alternative Opportunities – Q3 2025, pg. 31
Our scale, combined with the breadth and depth of our offerings, means we have the flexibility to meet your needs as markets evolve.
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