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Alternative opportunities: 2026 outlook for private credit and equity, real assets, and hedge funds

March 4, 2026
Invesco
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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. Looking ahead to 2026, we’re favoring private debt, real assets, and hedged strategies versus private equity. Here are key takeaways from each asset class. (Read the complete Alternative opportunities 2026 outlook.)

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

We’re overweight direct lending as all-in yields remain attractive for senior positioning, especially in the core middle market. Significant private equity dry powder and a backlog of exits point to a continuation of improved deal activity. We’re also overweight real estate credit, given high levels of current income and a recovering real estate equity market.

Q4 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 – 2026 outlook, pg. 5

Private equity (PE): Underweight due to moderating valuations

We remain underweight private equity. Beneath the surface, we’re beginning to normalize our views on leveraged buyouts versus growth strategies. The reopening of capital markets and aging of dry powder led to a rapid deployment of PE capital in the second half of 2025.

Q4 private equity summary

 

Overall

Valuations

Fundamentals

Secular trend

Private equity

Underweight

Unattractive

Neutral

Neutral

Source: Invesco, Alternative Opportunities – 2026 outlook, pg. 14

Real assets: Slight overweight as valuations approach trough 

We’re slightly increasing our exposure to real estate as our conviction that valuations have bottomed is beginning to firm. We’re convinced that the recovery in the real estate equity market is well underway. Challenges such as tight cap rates and potential weakness in certain sectors persist, however.

Q4 real assets summary

 

Overall

Valuations

Fundamentals

Secular trend

Real estate

Overweight

Attractive

Neutral

Neutral

Infrastructure

Overweight

Unattractive

Attractive

Attractive

Source: Invesco, Alternative Opportunities – 2026 outlook, pg. 23

Hedge funds: Overweight due to arbitrage spread levels and central bank easing cycle

Hedge funds with lower betas to market risk may be a valuable alternative within a portfolio, in our view. We continue to find hedge funds attractive; however, it’s moderating as capital markets activity picks up and the outlook for stock markets improves.

Q4 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 – 2026 outlook, pg. 31

Read the complete Alternative opportunities 2026 outlook.

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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 23 February 2026 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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