Partners Group expects private markets to enter 2026 at what it describes as “high altitude”, with valuations elevated across asset classes and conditions requiring greater selectivity.

Partners Group notes that global growth proved resilient in 2025, despite geopolitical tension and policy uncertainty. Looking ahead, the firm expects continued support from policy measures. In the US, rate cuts delivered in 2025 and a further 25–50bps of easing expected in 2026 should reduce borrowing costs. Around $11trn of floating-rate debt is set to benefit from lower interest expense, easing refinancing pressure ahead of a 2026–2027 maturity wall.

Fiscal policy is also expected to play a role. Partners Group highlights US tax changes that could lift after-tax incomes by more than 5%, with combined measures representing roughly 1.2% of GDP growth. In Europe, the firm anticipates two additional 25bps ECB rate cuts, bringing the deposit rate towards 1.5%, as weak consumption and contained inflation create room for further easing.

Against this backdrop, private equity activity is rebounding. Partners Group points to recovering transaction volumes in both the US and Europe, with European deal activity potentially exceeding 2021–2022 levels. Valuations have moderated from their pandemic peaks, supporting renewed deal flow. The strongest opportunities are seen in control investments, where active ownership can steer companies through volatility, and in selective secondaries, particularly LP-led transactions trading at discounts.

Private credit remains attractive, though returns are moderating as base rates decline. Partners Group highlights Europe as offering relative value due to wider spreads, lower leverage, and stronger creditor protections compared with the US. The firm expects bifurcation within the asset class, with selective middle-market lending remaining resilient while lending to large corporates faces margin pressure.

Infrastructure is positioned as a strategic overweight. Partners Group highlights long-dated, inflation-linked cash flows and secular demand driven by energy transition, grid upgrades, and data-centre expansion. The firm favours mid-market infrastructure secondaries and direct exposure to US power and energy assets, while urging selectivity in renewables and data centres due to elevated valuations and policy sensitivity.

Over a five-year horizon, the outlook identifies artificial intelligence as a central opportunity. Partners Group cites projections showing the total addressable market for generative AI nearly doubling to approach $1trn by 2027. However, productivity gains may not be fully realised until after 2030, underscoring the need for scenario analysis and disciplined deployment.

Partners Group concludes that private markets in 2026 will reward patience and selectivity rather than aggressive expansion. With valuations high and volatility possible, the firm argues that rigorous underwriting, regional diversification, and focus on durable structural themes will be critical to navigating the next phase of the cycle.

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