Private Markets at a Financial Inflection Point

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Private markets, once the preserve of specialist funds and institutional suites, have now entered the mainstream of global asset allocation. With global assets under management (AUM) in private markets hovering around USD 13 trillion and forecast to possibly double by 2030, investors are asking not just how much but which segments and managers to trust.

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Within this broad universe lie four key pillars: private equity (PE), private credit (PC), real estate, and infrastructure. Each segment is attracting significant capital. For many investors, especially institutions and family offices, the question has shifted from “Should I allocate to private markets?” to “How will I allocate, and to whom?”

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However, recent events in the credit sphere, most notably the collapses of First Brands and Tricolor, underline that while the macro story is strong, not all private credit is equal. These developments sharpen the conversation around underwriting, leverage, and risk-selection.

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The Numbers: Global and Regional Momentum

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Private Equity

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Private equity remains the largest branch of private markets, with roughly USD 7 trillion in AUM. Despite tougher public markets and increased regulatory scrutiny, fundraising continues and secondaries markets are graduating into scale.

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Private Credit

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Private credit is the fastest-growing segment. Global AUM is estimated at USD 1.7 trillion+ in 2024, nearly doubling since 2020. Institutional allocators cite floating-rate structures, illiquidity premiums, tighter covenants and diversification benefits.

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Real Estate & Infrastructure

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Real estate continues to evolve: logistics, industrial, multifamily and residential rental platforms are thriving; office remains challenged.

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Infrastructure is arguably the most future-proof segment: the energy transition, digital infrastructure (data centres, telecom towers), urbanisation and public-private partnerships mean that more and more capital must be deployed into physical long-term assets.

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Regional View

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• North America remains the epicentre of private markets (especially private credit and PE).
• Europe is picking up pace, helped by regulatory reforms such as the ELTIF 2.0.
• Asia-Pacific sees strong tailwinds: growing middle classes, infrastructure gaps, and increasing corporate expansion beyond China.
• Emerging Markets (EM) are increasingly catching up. For example, private lenders reportedly deployed USD 11.7 billion in H1 2025 across India, Southeast Asia, Eastern Europe and the Gulf. EM still represent less than 10% of the global private credit market while contributing nearly half of global GDP: highlighting enormous runway for growth.

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Structural Drivers of Growth

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Several enduring, structural factors underpin the shift into private markets:

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• Institutional re-allocation: pension funds, insurers and sovereign wealth funds are steadily increasing allocations to private assets, often targeting 20-30 % of portfolio exposure.
• Search for yield: shredded bond yields and heightened volatility in public markets continue to push investors toward illiquid, privately negotiated assets that offer illiquidity and complexity premiums.
• Bank retrenchment: stricter bank regulation (post-2008) and risk capital constraints mean many banks are retreating from mid-market lending, leaving private credit funds to fill the gap.
• Global megatrends: decarbonisation, digitalisation, urbanisation and infrastructure build-out require huge sums of capital over long investment horizons—capital that is ill-suited to public markets or short-term return horizons.
• Secondaries and liquidity evolution: as the private markets ecosystem matures, liquidity vehicles (secondaries, tender offers, preferred equity structures) make private assets more accessible and manageable for investors.

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Conjunctural Drivers: Why Now?

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In addition to the structural forces above, there are more immediate catalysts boosting private markets today.

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• Volatility in public markets: inflation, geopolitical tensions (e.g., U.S.–China), supply-chain disruptions and surprise interest-rate moves have made investors increasingly wary of pure public-market beta.
• Technology and access: digital platforms, tokenisation and improved fund structures are slowly lowering barriers to entry for private assets.
• Policy & regulation: regulatory reforms in Europe (ELTIF 2.0), increased transparency for private funds and growing SEC scrutiny (particularly of private credit) all improve investor comfort.
• Emerging-market momentum: strong deal flow in India, Southeast Asia and the Gulf reflect how EM corporates and infrastructure now rely on private capital as much as or more than traditional bank lending.
• Recent credit “wake-up” call: the collapses of First Brands and Tricolor serve as a timely reminder about underwriting risks—see next section.

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Spotlight on the Credit Wake-Up Call

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The recent high-profile bankruptcies of First Brands (auto-parts maker) and Tricolor (sub-prime auto lender) have spooked parts of the credit market.  

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Here’s how they fit into the broader narrative and why they are not a systemic indictment of private credit per se.

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What happened

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• First Brands had issued billions in leveraged debt, including invoice financing, with alleged opaque structures and aggressive acquisition strategy.  
• Tricolor collapsed amid fraud allegations and losses of around USD 170 million at major banks.  
• Major banks flagged exposures; the CEO of JPMorgan Chase & Co., Jamie Dimon, warned “when you see one cockroach, there are probably more”.  

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Why this is not the collapse of private credit

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• The key lenders involved were banks and hedge-fund investors, not the large direct-lending private credit funds that dominate the mid-market.  
• The credits were extremely leveraged, highly complex, and had less conservative underwriting than would characterise a typical private credit fund.
• Industry commentary suggests these were idiosyncratic pockets of stress rather than a broad breakdown of credit quality.  

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Lessons & implications for private credit investors

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• Underwriting matters: investors must assess equity-to-debt ratios, covenant strength, collateral quality and sponsor track-records. Senior secured direct lending with conservative leverage remains more resilient.
• Sponsor quality and transparency: who is providing the loan? What level of subordinated equity is in play? How transparent is the asset-pool?
• Manager choice: not all private credit managers are alike: scale, institutional governance, documentation quality, audit controls and fund-structuring all matter.
• Leverage and risk spectrum: highly-levered credits and “shadow-bank” style platforms are higher risk; many large private credit funds target low to moderate leverage and strong covenants as part of the value proposition.

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In short: this episode reinforces the importance of manager and deal-selection discipline, rather than undermining the entire private credit thesis.

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Why Private Markets (and Private Credit) Still Make Sense

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Despite the credit scare, the underlying fundamentals of private markets remain robust.

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• Stronger bargaining power: With banks stepping away, private credit managers are negotiating superior terms: higher interest spreads, floating rates, tighter covenants and first-lien positions.
• Structural tailwinds: The financing gap for mid-market corporates, infrastructure and SMEs, especially in EM, is widening. Private markets are filling that gap.
• Regulatory and transparency improvements: Growing scrutiny (e.g., by the U.S. Securities and Exchange Commission) and evolving fund architecture are building investor confidence in the long term.
• Emerging markets gaining share: As EM deepen their private capital ecosystems, expected growth rates are faster and return spreads higher, albeit with higher risk.
• Diversification benefits: Private assets typically offer lower correlation to public markets and can blunt the impact of public-market volatility.
• Managed downside: Well-structured private credit vehicles (senior, secured, moderate leverage) offer a sideways/downside protective profile, while still participating in yield pick-up.

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For example, a fund specialising in short-term, trade finance credit, with credit-insurance overlays and conservative leverage, offers a different risk-return profile to highly-leveraged sponsor-backed acquisitions.

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In that sense, firms like Incomlend Capital, with a focus on credit risk mitigation (via insurance, diversified trade-finance portfolios and no use of leverage), are well-positioned in the current private credit wave.

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Segment Snapshots: Where to Focus

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• Private Equity: Buy-outs, growth-equity and secondaries continue to see momentum. Challenges remain (valuation discipline, competition, public-to-private arbitrage), but the structural case remains strong.
• Private Credit: Direct lending, asset-based finance, trade-finance credit and specialty finance are the growth engine. Manager selection is key; the recent First Brands/Tricolor episode underscores that acutely.
• Real Estate: Office remains under pressure; the growth is in logistics, industrial, residential rentals and alternative real-estate assets (e.g., data-centres, senior living).
• Infrastructure: Arguably the backbone of long-horizon investing: renewables, digital infrastructure, transport, energy transition projects. The capital need is immense and financing must increasingly come from private sources.

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Risks to Monitor

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• Illiquidity: Private assets are less liquid; even with secondaries, the lock-in remains longer than public equities or bonds.
• Valuation transparency: Many private assets lack the mark-to-market discipline of public markets; hidden leverage or opaque structures can hide risk.
• Dry-powder risk: Record levels of uninvested capital (estimated at USD 3 trillion) may lead to return-compression or weaker terms as competition increases.
• Emerging-market exposures: FX risk, governance risk, local legal frameworks and higher default risk remain material.
• Public-market divergence: A sharp public-market crash could force investor redemptions and impact private-market liquidity indirectly.

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Outlook: Why This Growth Is Sustainable

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The private markets boom is anchored in enduring change in the global capital allocation landscape, not simply a cyclical up-tick. Key forecasts and trends suggest:

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• Private credit could double from today’s levels and surpass USD 3 trillion by 2030.
• Emerging-market private credit, currently a small share, will likely capture a meaningful slice of global flows as EM corporates lean into private financing.
• Technology and digital platforms (including tokenisation) will broaden access to private markets, accelerating institutional, high-net-worth and eventually retail participation.
• Infrastructure investment needs (for example to meet net-zero targets) guarantee multi-decade investment horizons, favouring private capital deployment.
• As the ecosystem matures (improved fund governance, secondaries liquidity, regulatory clarity), the overall risk-return profile improves, making private markets more “investor-friendly” in the long term.

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Conclusion

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Private markets are no longer an alternative: they are a fundamental pillar of modern portfolios. The boom across private equity, private credit, real estate and infrastructure is underpinned by structural shifts in capital markets, institutional behaviour and global financing needs.

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The recent First Brands and Tricolor debacles serve as an important reminder: you must look under the hood. Underwriting discipline, leverage controls, sponsor quality and manager selection matter more than ever. But they do not weaken the broader case for private markets, they reaffirm it.

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In an age of low public-market return potential, heightened volatility and evolving global financing needs, private markets stand out for returns, diversification and access to long-term value creation. For savvy investors, the more relevant question is no longer whether to participate, but where, how and with whom.