Overlay

05 Jan 2026

Five trends shaping alternative investments in 2026

The funds industry faces a transformative 2026 as market forces, regulation, and investor shifts reshape private markets.

By Neil Walker

Head of Institutional Banking

7 minute read time

The funds industry finds itself in a moment of transformation as we look ahead to 2026, with market forces, regulatory reform, and changing investor behaviour redrawing the private markets landscape.

While 2025 may have been defined by resilience, the coming year promises structural shifts that will influence how managers raise and manage capital. Agility and foresight will be essential to navigating this shifting environment.

Meanwhile, technological innovations, especially in AI, are moving at pace and are likely to affect private markets profoundly throughout this year and well into the future.

Here are five key trends I expect to define alternative investments in 2026:

Liquidity solutions becoming core strategy – Use of Net Asset Value (NAV) financing, hybrid structures and continuation vehicles will see further adoption this year.
Structural innovation to offer investor flexibility – Structures like Evergreen funds and Separately Managed Accounts (SMAs) will broaden investor options.
Fundraising polarisation and extended timelines – Co-investment appetite will strengthen. Institutional investors are prioritising scale, track record, and operational resilience.
Sectoral rotation and resilience – Investment focus will shift to new opportunities, like AI-driven infrastructure and energy transition.
The continuing evolution of ESG – Regulators and investors will demand greater accountability on sustainability claims, while sustainable finance will continue to evolve.

The macroeconomic backdrop

At a macroeconomic level, 2026 is likely to be defined by buoyant US economic growth spurred on by a large monetary stimulus from the US Federal Reserve, the slowing of global trade volume, and crucial elections in Europe and the US.

The Fed is expected to deliver around 100bp of rate cuts, taking rates into the 2.75–3.0% range. While this should support near-term US growth and sustain risk appetite, it could also raise inflationary risks.

In contrast, European Central Bank rates have likely reached their terminal point at 2.0%, and the Bank of England’s activity is expected to peak at the end of Q1 at 3.5%. This divergence reinforces expectations of narrowing interest-rate differentials and a structurally weaker US dollar.

Geopolitically, 2026 could bring a trade inflection point. Global trade growth is expected to slow to roughly 2.5% year-on-year as protectionism, supply-chain reorientation and defence spending reshape cross-border flows.

Given current conditions, private capital may uncover attractive opportunities across strategies tied to falling interest rates, increased defence and infrastructure spending, expanding regional trade, and currency volatility in 2026.

While uncertainty remains, active fiscal support and evolving geopolitical dynamics creates a constructive backdrop for investment, meaning 2026 could shape up to be a fascinating, if occasionally unnerving, year. Still, with upheaval and uncertainty comes opportunity.

Top five trends for 2026

1. Liquidity solutions become core portfolio strategy

Liquidity is no longer a tactical consideration but is instead becoming a strategic pillar. With exit markets still constrained and IPO windows narrow, managers are increasingly turning to NAV financing and hybrid structures to unlock liquidity at the portfolio level. These tools, which were once seen as niche, have increasingly become mainstream.

NAV facilities – According to Rede Partners’ 2025 survey, the volume of NAV financings rose by 144% between 2023 and 2025. Expect widespread adoption in 2026 as managers seek to bridge timing gaps and support distributions without forced asset sales.
Hybrid financing – Combining subscription lines with NAV-based solutions offers flexibility and cost efficiency.
Continuation vehicles and preferred equity – GP-led secondaries remain robust, enabling managers to hold high-performing assets longer while providing liquidity to existing investors.

The competitive dynamics among lenders are intensifying, driving innovation in pricing and covenant flexibility. For managers, the challenge will be balancing liquidity needs with long-term portfolio integrity.

2. Structural innovation for investor flexibility

Investor preferences are evolving rapidly, and fund structures are adapting in response. Evergreen funds and SMAs are gaining traction, offering smoother cash flows and tailored governance rights. These structures reduce the J-curve effect and provide institutional investors with greater control over fees and exposure.

Beyond traditional models, tokenisation and digital fund structures are emerging as a frontier for operational efficiency and liquidity. While still early-stage, these innovations could redefine how investors access private markets.

Another notable trend is the growing interest from retail investors and high-net-worth individuals. Semi-liquid vehicles such as Long-Term Asset Funds in the UK and European Long-Term Investment Funds are opening doors to new capital pools, although they bring additional regulatory and operational complexity.

3. Fundraising polarisation and extended timelines

Despite some commentary from Preqin in their Global Reports 2026 suggesting cautious optimism for 2026 I believe the fundraising environment will remain challenging for many and 2026 will see continued polarisation. Capital is concentrating among top-tier managers, while mid-market and emerging managers face longer cycles and heightened scrutiny.

Flight to quality – Institutional investors are prioritising scale, track record, and operational resilience.
Extended timelines – Longer fundraising periods mean subscription facilities remain essential, but LPs are demanding greater transparency on costs and leverage.
Co-investment appetite – LPs are increasingly using co-investments to manage fee drag and gain more control, reinforcing the broader trend toward customisation.
Specialist solutions – As liquidity needs grow and new entrants emerge, demand for bespoke financing structures, like Tranche B facilities and customised subscription credit solutions, is rising.
Public ratings gain traction – Publicly-rated fund finance facilities are becoming more prominent, underscoring growing demand for transparency, standardisation, and broader capital markets access in the fund finance space.

Managers will need to differentiate through sector expertise, operational excellence, and innovative investor solutions to succeed in this environment.

4. Sectoral rotation and resilience

Capital allocation is shifting in response to macroeconomic and technological trends. Several sectors stand out for their resilience and growth potential:

Energy transition and infrastructure – Closed-ended funds targeting renewables, grid modernisation and decarbonisation projects are attracting significant interest.
Private credit – Growth persists, with managers focusing on niche strategies such as asset-backed lending and specialty finance. According to With Intelligence, Europe captured 37% of global private credit fundraising in H1 2025, up from 24% in previous years.
AI-driven infrastructure – Demand for data centres and edge computing is accelerating, fuelled by the rise of artificial intelligence and cloud adoption.
Life sciences real estate – Despite broader real estate headwinds, this sector remains a magnet for capital due to its long-term growth drivers.

Managers who can anticipate these rotations and align strategies accordingly will be well-positioned to capture value.

5. ESG’s evolution: from marketing to compliance

This year, compliance will dominate the ESG agenda with regulatory frameworks such as the Sustainable Finance Disclosure Regulation, EU Taxonomy, and the Corporate Sustainability Reporting Directive demanding granular, auditable reporting. This shift is reducing tolerance for vague commitments and elevating the importance of measurable impact.

Key developments include:

ESG-linked financing – Margin ratchets tied to sustainability KPIs are becoming a differentiator for managers and borrowers.
Technology integration – ESG analytics platforms are essential for meeting disclosure requirements and avoiding greenwashing risk.
Investor expectations – LPs are prioritising managers who can demonstrate regulatory alignment and verifiable outcomes.
Transition loans – As some borrowers’ reconsider ESG KPI-linked financings due to cost and complexity, transition loans are emerging as a pragmatic alternative.

It is clear that ESG is no longer being viewed as a marketing tool but as a compliance imperative and a driver of competitive advantage.

Technology driving transformation across sectors

Operational efficiency and technology adoption will be defining success factors in 2026. Our recent research, which surveyed 100 alternative funds and included interviews with industry leaders, shows funds are determined to harness technology’s full potential. Yet the industry stands at an inflection point. With the pace of change accelerating, funds must move beyond experimentation and unlock value by forging trusted partnerships.

The impact spans every sector. In private equity and private debt, AI promises to reshape operations, due diligence, credit assessment and deal sourcing through automation and predictive analytics. In real assets – real estate, infrastructure and renewables – AI could transform asset management, maintenance and energy optimisation.

The payoff? Lower operating risk, greater efficiency and stronger, more defensible long-term returns across portfolios and investment cycles. Of course, risks remain, from data quality to cyber security, and navigating these will be critical to success.

Looking ahead

As we embark on 2026, the defining challenge for alternative asset managers will be navigating a complex landscape with agility and foresight.

From shifting liquidity dynamics and structural innovation to ESG compliance and the accelerating impact of AI, the environment will reward those who can adapt quickly with a strategic focus.

Risks such as policy divergence and geopolitical change are becoming persistent features of the investment landscape. In this setting, success will depend not just on capital deployment, but on the quality of insight and execution of every decision.

With deep expertise across a broad range of sectors, RBS International can help you navigate the challenges and seize the opportunities that 2026 will undoubtedly present. Contact your relationship team to start a discussion on how we may support you.

Posted in:

Keywords:

Five trends shaping alternative investments in 2026

By Neil Walker

Head of Institutional Banking

7 minute read time

Latest insights

Five trends shaping alternative investments in 2026

Making AI work in financial services

Financing continuation vehicles