Chasing value, taming euphoria: why private markets matter to Asian allocators in 2026

Private markets surged post-COVID on low interest rates and abundant capital, but momentum then slowed amid macro and geopolitical headwinds. Recovery in 2025 was modest and uneven: fundraising remains challenging, distributions (in private equity) lag and liquidity pressures persist. Nevertheless, the landscape is beginning to shift. Optimism is building for 2026. Rates appear stable, the IPO market is reopening and there’s renewed focus on operational value creation.

Private credit – momentum or reset?

Private credit remains one of the most dynamic segments, with strong momentum and rising investor interest. Its enduring drivers − diversification, yield enhancement and floating-rate appeal − remain intact. Concerns about systemic risk require perspective: private credit’s growth stems from banks’ retrenchment and financing needs. In our view, this trend has further to run, especially in Europe.

However, for those who remain cautious, it is important to recognise investors have options, both in the parts of the market they choose to invest in, and in the kind of manager they want to work with.

There are two principal markets for private credit: the US and Europe. Comparing both, Europe has historically offered more favourable risk-adjusted returns relative to the US. Not only are European returns higher, but credit quality is more resilient, with Europe offering higher interest cover and lower default rates.

Thoughtful selection of an investment partner remains key for investors. Manager approach, resources and risk tolerance are all potential differentiators, to name a few factors. In our view, selectivity, credit vigilance and experience remain critical in ensuring delivery of the best client outcomes in private credit.

Diverse strategies offer differentiated sources of risk and return

Other private market strategies present investors with differentiated sources of risk and return – an important attribute in the current macro and political environment.

Within structured credit, asset-backed finance, for example, offers opportunities across a diverse array of credit pools – from consumer finance to equipment leasing – typically providing lower correlations to traditional credit markets.  As with private credit, the trends driving structured credit are not transient, rather long-term factors which are being accelerated by innovation across the asset class.

Private equity (PE) - in transition

PE continues to reset after the 2021 peak, with fundraising, deal activity and exits below that year’s highs (though broadly in line with pre-2021 levels). Encouragingly, underlying operating performance remains healthy, with high single-digit annualised sales and EBITDA growth across private market indices.

Signs of an IPO rebound are emerging − Circle Internet Group’s IPO was 25 times oversubscribed − and a long tail of pent-up IPOs could lift confidence. If this trend persists into 2026, coupled with potential outsized PE exits (top five VC-backed companies are valued at c.US$900 billion¹), exit figures should improve significantly.

Looking ahead, we believe the most compelling opportunities lie in transformative sectors: climate tech, fintech, cybersecurity, health tech and energy transition. Further interest rate cuts should provide a tailwind, supporting transactions and valuations by reducing financing costs and boosting company performance.

2026: private markets’ transformation and opportunity

Private markets’ growth should continue, driven by ‘democratisation’ through LTAFs, ELTIFs and Evergreen funds, widening access for investors. Greater accessibility and improving market dynamics will likely keep private markets in focus in 2026, with rate cuts providing an additional tailwind.

Concluding takeaways from M&G’s CIOs perspectives

As investors look to position themselves for the year ahead, it’s essential to complement private markets insight with the perspectives of our CIOs in equities, multi asset and fixed income. Together, these views form a holistic outlook − helping investors navigate complexity, seize opportunity and build resilience across every asset class.

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Fabiana Fedeli, CIO Equities, Multi Asset and Sustainability

Andrew Chorlton, CIO Fixed Income

• From the low-interest rate doldrums of the 2010s, fixed income is delivering income once more. With attractive real yields, we believe government bonds can offer investors an attractive source of income, without taking on additional credit risk.
• Central bankers are still walking the delicate tightrope between growth and inflation. With increasing political pressure and the appointment of a new chair of the Federal Reserve, 2026 will likely be an important year for central bank independence.
• As the developed world continues to face macroeconomic challenges, diversification will be more important than ever. The emerging market debt universe appears an increasingly attractive alternative to US assets.

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Emmanuel Deblanc, CIO Private Markets

• The recovery within private markets continues with fundamentals intact and market dynamics supporting its long-term appeal.
• European rather than US private credit may prove a more reassuring allocation for private credit investors in 2026.
• New fund structures and appreciation of the merits of the asset class is increasing the investor base for private markets.

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As 2026 unfolds, investors face a landscape defined by transformation, innovation and resilience. From the evolving role of AI and the resurgence of fixed income to the enduring appeal of private markets, one message stands out: selectivity and adaptability will be critical.

Those who prioritise fundamentals over momentum and embrace diversification will be best positioned to capture long-term opportunities across global markets.

_{¹Source: Pitchbook, Caplight, Notie.co estimated average of 31 March 2025.}

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