Overview

In recent times, the subject of private markets has appeared in newspapers almost daily, and not just in the financial press. Much ink has been spilled on the advantages and pitfalls of investing in private capital.

Drawing on insights from investors, industry experts and media, this article focuses on recent issues of note in the private market space and points to trends in the immediate future. We refer to four major investment sectors:

• Private equity
• Private debt
• Infrastructure
• Real estate

Recent trends

Private equity – searching for the exit

Private equity firms have struggled to find exits for their portfolio companies, resulting in a backlog of unsold investments. Bain and Co estimate that nearly US$3.6 trillion of investment remained unsold last year, with typical holding periods extending beyond five years. In China, large private equity players such as KKR and Blackstone report no complete divestments from investment in 2025, according to data providers such as Dealogic and Pitchbook. In the absence of traditional exit strategies (trade sales or initial public offerings), private equity players have resorted to other exit strategies, such as the secondary markets. Although these methods can mean investments can be exited on more favourable terms in the future, the increased use of these strategies reflects the current difficulty in returning capital to investors.

Private debt – the “insurance trade”

Large private equity houses have, in recent years, used the insurance trade to expand the distribution of private credit investments. For example, large players such as Apollo Global, Blackstone and KKR have all used life insurance to fund lending. Apollo has taken full control of insurer Athene. Such insurance companies market products like annuities that receive large initial inflows from policyholders and pay benefits over a long period. Insurance companies invest in private debt instruments to fund these long-term liabilities. Alternative asset managers have devised complex methods to package loans, improving the investment’s credit rating and allowing insurance companies to take on these more illiquid investments.

Private investments are often valued using model-based approaches that rely on assumptions, cash flow projections and comparable market prices. These valuations are typically produced on a quarterly basis. This time lag in the valuation process, together with subjective inputs, often leads to an understatement of the asset volatility. The mechanism for ensuring insurers hold adequate capital is affected, given that asset volatility is a key input into insurers’ capital calculations.

Insurers are well placed to take on illiquid investments, but the recent boom in this investment may mean insurers have taken on too much risk at elevated prices.

Infrastructure – expansion!

Investors have been keen to increase allocation to the infrastructure class. McKinsey notes that favourable tailwinds, such as increased global trade, global energy transition and demographic shifts, will boost interest in this asset class. Prime Minister Mark Carney’s launch of the Major Projects Office signals the Canadian government’s commitment to increased infrastructure investment in Canada, promising investment in liquified natural gas infrastructure, nuclear power and port expansion.

Real estate – data centres at the forefront

Data centres, considered an alternative sector in the real estate class, continue to draw significant investment. So-called hyperscalers (e.g., Google and Amazon) continue to invest heavily in building storage and computing power for their AI models. LaSalle’s property outlook refers to this as a “private sector stimulus scheme.” In Canada, much of the focus on data centres comes from Alberta. The province has emphasized its abundant natural gas and cool climate as key factors in attracting data centre investment.

In Canada, much of the focus on data centres comes from Alberta. The province has emphasized its abundant natural gas and cool climate as key factors in attracting data centre investment.

What next?

Private equity – the influence of AI

AI has also influenced the private equity industry. Bain and Co provide the example of Vista Private Equity Group streamlining staffing levels and implementing AI in portfolio companies. This trend is very evident in companies focused on software buyouts. The companies owned by these private equity investors are also implementing AI in their business operations.

The valuation of these portfolio companies is also affected. Take portfolio companies focusing on software, for example. The golden age of software returns faces an existential threat from AI. The rule of 40 used in the evaluation of software as a service (SaaS) has come under threat, causing a reassessment of the valuation of portfolios.¹

It should be noted that most private equity investments in the U.S. are in firms with fewer than 500 staff and no technology exposure. Many such “internet-proof” businesses are less affected by this trend.

Private debt – a halt to the democratization of credit?

Perhaps the most newsworthy item in private markets is the outflows from private credit funds. Maintaining retail savings in private investment vehicles is difficult given their illiquidity. Semi-liquid investments are designed to offer withdrawals of up to five per cent on a quarterly basis, making them more suitable for retail investors. However, this is not always the case. Funds have experienced large redemption requests in recent months. Witness Witness Blackstone’s BCred fund experiencing a 7.9 per cent withdrawal. Blue Owl decided to gate withdrawals for the foreseeable future. Many investors gain access to private credit through tradeable vehicles such as business development companies. Commitments to these investments by retail investors and wealthy individuals dropped by 40 per cent in January 2026 compared to December 2025.

It seems reasonable to allow retail investors access to an asset class that has been available to larger investors for decades and yielding greater returns. However, the lack of liquidity shows the difficulty in offering this investment to this class of investors.

Infrastructure – asset reclassification

Infrastructure investments are typically thought of in terms of “hard assets.” Bridges, tunnels and roads form part of an infrastructure portfolio. Digital infrastructure such as data centres, fibre optic and cloud-based systems also form part of this group. However, operational infrastructure services such as maintenance, monitoring and security have emerged as “soft assets.”

McKinsey suggests that infrastructure is no longer just physical – it is digital, service based, data enabled and integrated. Servicing infrastructure and smart grids for electricity are also infrastructure assets. A recent paper from the International Monetary Fund indicates that governments should pay attention to digital infrastructure, such as payment systems, in the same way as bridges and roads.

Real estate – hybridization of assets

“Hybridization of assets” refers to bringing together two key investment themes or subsectors, allowing investors to have exposure to multiple themes through a single asset. Data centres classified as real estate investment now overlap with infrastructure assets. This is also an overlapping of digital and energy themes. Recent legislation such as Alberta’s Bill 8 has indicated that developments such as data centres must bring their own power. Recent media articles have highlighted retail consumers’ concerns that data centres will elevate the price of electricity. Many such developments are seeking alternate sources, such as nuclear, using diesel generators as a backup in the interim.

A final note

The topic of private capital is broad and fast moving. Each sector merits its own discussion. Notwithstanding recent events, private capital will be included in portfolios going forward. The U.S. administration issued an executive order in the recent past that enables 401 (k) saving plans to invest in a range of alternative assets.

Together with expanded sales distribution networks for all sectors (retail and institutional) and a changing definition of the asset class (hybridization), this is an evolving story.

¹ Company revenue growth % + profit margin % ≥ 40%

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Alan Coady, CFA, CAIA, FCIA, is an actuary at Addenda Capital. He focuses on investment for insurance companies and pension funds. The views expressed in this article are his own.