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

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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.)

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

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. 

Q3 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 – Q3 2025, pg. 5

Private equity (PE): Underweight due to moderating valuations

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.

Q3 private equity summary

 

Overall

Valuations

Fundamentals

Secular trend

Private equity

Underweight

Unattractive

Neutral

Neutral

Source: Invesco, Alternative Opportunities – Q3 2025, pg. 14

Real assets: Slight overweight as valuations approach trough 

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.  

Q3 real assets summary

 

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

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. 

Q3 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 – Q3 2025, pg. 31

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  • 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 11 September 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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