Half of asset and wealth managers plan to increase their allocations to private markets over the next two years, with Asia-Pacific institutional investors showing slightly stronger interest in the asset class, particularly private credit.
Private markets demand remains resilient despite macroeconomic headwinds and a slowdown in fundraising, with investors in the Asia-Pacific region displaying stronger intent to lift allocations, according to State Street’s 2026 Private Markets Report.
The findings, based on a global survey of 480 senior executives across asset managers, asset owners and wealth intermediaries, underscore continued long-term confidence in private assets despite ongoing macroeconomic and liquidity challenges.
State Street senior managing director for global alternatives Eric Chng said the report highlights that durability.
“If you look at institutional investors who’ve been in private equity for one or even two decades, they’ve always viewed private markets as a diversification tool. It gives them access to return profiles they simply can’t get in public markets,” he told Investor Daily.
“Think about the likes of Anthropic or SpaceX before they were accessible in the public markets – that’s the kind of private value creation investors want exposure to, and it tends to come with higher return potential.”
Globally, only 7 per cent of respondents plan to reduce their exposure to private markets over the next two years, while 43 per cent intend to maintain current allocations.
“Investors use private markets to smooth out the volatility in their public portfolios. They take a long-term view, so near-term geopolitical headlines – a new Fed chair, another iteration of a peace deal – are concerning but not thesis-breaking,” he said.
“If you look at our last two surveys, every year there’s been some geopolitical shock, yet respondents consistently say they’re going to increase allocations to private markets. That tells you their confidence in the asset class doesn’t fade because of near-term events. It would take a much more fundamental, structural shift to really change that.”
APAC investors are notably more bullish on private credit strategies, with 49 per cent planning to increase exposure compared with 39 per cent globally. Chng said this reflects where many investors sit in their private markets journey.
“Many are moving from purely public equity and fixed income into their first private markets allocations via fund-of-funds and co-investments. Private credit feels more familiar, because lending isn’t a new concept for them,” he told Investor Daily.
He added that returns in Asia’s private credit market are generally stronger than in the US.
“Each market – India, China, Korea, Japan – has a different corporate profile, and managers who can source deals at more attractive spreads are driving outperformance. That’s a big reason APAC investors are so bullish on private credit.”
Australia, however, remains relatively insular, according to Chng.
“Many of the big asset owners have historically allocated heavily to domestic private assets, but that creates concentration risk. We’re now seeing Australian institutions increasingly deploy capital internationally to diversify,” he said.
“Australian asset owners typically have higher allocations to private markets than the APAC average, and they’re already quite sophisticated. They tend to be more infrastructure- and real estate-heavy than many of their regional peers.”
Chng also pointed to a broader structural shift in global private markets, driven by the rise of retail participation.
“Younger, digitally savvy investors are taking investment decisions into their own hands rather than just putting money into a pension fund or 401(k),” he said.
“Wealth and advisory platforms have sprung up everywhere to tap this growing retail demand. That’s created a powerful macro shift away from traditional pooled pensions toward more self-directed investment.”
He added that long-term value creation remaining in private markets is drawing increased attention from retail investors.
“Companies are staying private for longer, so retail investors have watched ‘juicy’ private returns from the sidelines without a way to participate. With the rise of wealth platforms and advisors, it’s no surprise private markets have become a hot topic for retail investors wanting exposure.”
Despite a more cautious near-term environment – including a 47 per cent decline in fundraising over the past 12 months and slower deal activity – investors are maintaining strategic commitments, with increasing emphasis on manager quality, scale and track record.
“Investors are becoming more selective in how they deploy capital. Expectations around discipline, transparency, and delivery are rising,” Chng said.
“LPs are becoming more discerning. They’re asking GPs about track record, the timeliness of distributions, and whether they’re truly creating value.”
He added that tightening liquidity is also pushing managers toward new capital pools, including wealth channels.
“Investors are becoming more selective in how they deploy capital. Expectations around discipline, transparency, and delivery are rising,” Chng said.
Within private markets, institutional investors continue to favour private equity due to its depth and track record.
“Around two-thirds of private assets under management are PE-backed strategies, so if you want to deploy capital at scale, PE remains the mainstay,” Chng said.
Over the past two years, State Street has observed rising interest in real estate and infrastructure, including data centres and renewable energy.
“After falling out of favour over the past five years, institutions are taking a fresh look at how these can augment their overall investment thesis.”
Consolidation is also intensifying across private markets, with a clear barbell structure emerging.
“At one end you’ve got the mega-managers – the Apollos and the BlackRocks of this world – launching US$20 billion funds and attracting ever more capital. Traditional long-only managers are also acquiring alternative managers to diversify their product sets, which further concentrates AUM at the top,” he said.
“On the other end of the barbell, you have niche and boutique GPs, especially in APAC, running US$2-5 billion strategies – a mid-market buyout fund in Korea or a focused credit strategy in India, for example. They don’t need US$20 billion; they need to deploy a more limited pool of capital very effectively. Their outperformance is driven by specialisation and a very tight investment thesis.”
He said the key challenge lies in the middle of the market, where differentiation will determine survival.
“A mid-sized manager doesn’t necessarily need to bulk up operationally to access tens of thousands of smaller investors anymore. If they can harness technology and find the right partners, they can avoid becoming M&A casualties and either move up-market or double down on a niche,” Chng told Investor Daily.
“Clear differentiation in strategy will underpin who thrives and who gets squeezed.”
On artificial intelligence, State Street noted that frontier technologies are not yet a primary focus for APAC allocators, largely because much of the innovation is US-driven.
“They’re already getting AI exposure indirectly through the GPs they back, but those deals are hard to access – you can’t just walk into an Anthropic or a SpaceX and say, ‘I’d like a stake.’ Selection skill and manager access really matter,” Chng told Investor Daily.
“For AI in private markets, the most compelling use cases are around unstructured data – how we ingest, process, and use that data more effectively. But most investors are still conservative about allocating meaningful capital to AI-related strategies until they see more proven use cases.”
On tokenisation, he said the underlying technology is largely in place, but practical applications remain limited.
“You can tokenise a fund and offer fractional ownership, but then you have to ask: what’s the true advantage versus existing mechanisms like ETFs or robo-advisers that already provide fractional access?”
He added that private markets face a fundamental valuation challenge in a tokenised structure.
“These funds often rely on patient capital and opaque, long-term value creation. If you create a secondary market through tokenisation, you introduce price discovery in an asset class where valuations are not as transparent as listed markets. That’s one of the main obstacles.”
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