Private markets are becoming less forgiving, with capital flowing to fewer managers and mistakes carrying a higher cost, according to J.P. Morgan Asset Management’s Alternative Outlook.

The report argues that selectivity, rather than abundance, is now central to the alternatives landscape.

The report argues that the period of broad capital dispersion across private markets is fading. Institutional investors are streamlining manager rosters and prioritising platforms that offer scale, diversified strategies, and the ability to deploy capital consistently across cycles. This shift is driving a growing concentration of capital among large, multi-strategy managers.

Private equity remains a core component of institutional portfolios, but J.P. Morgan Asset Management highlights a more challenging return environment. Higher financing costs have reduced the contribution of leverage, while exit markets remain selective. As a result, performance dispersion between managers is widening, placing greater emphasis on underwriting discipline, operational capability, and execution at exit.

Private credit is identified as a relative beneficiary of current market conditions. The report points to sustained investor demand for income and floating-rate exposure, particularly in senior and asset-backed strategies. At the same time, it notes increasing bifurcation within the asset class, as competition intensifies and pricing tightens for larger, more commoditised deals.

Infrastructure also continues to attract capital due to its long-dated and often inflation-linked cash flows. J.P. Morgan Asset Management highlights ongoing demand across energy transition, digital infrastructure, and transport assets, but warns that elevated valuations require greater selectivity, particularly in renewables and data-intensive sectors.

The outlook also underscores mounting pressure on smaller managers. Rising operating costs and more stringent due diligence processes are making it harder for emerging firms to compete. Consolidation across private markets is expected to accelerate as a result.

J.P. Morgan Asset Management concludes that access to capital is becoming a defining advantage in private markets. In a more polarised environment, investors are prioritising resilience, platform breadth, and proven execution over broad exposure.

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