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Alternatives

Private Credit Yields Rise as Secondary Discounts Signal Opportunity

Issue 7Week ending March 29, 20268 sources

WTI crude89.33+2.1%
Gold2,387.50+1.3%
REIT index1,514.85-1.8%
VIX27.44+3.2pts
HFRI composite2.40+0.3%
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Week Ending March 29, 2026

Private Credit Yields Rise as Secondary Discounts Signal Opportunity

§ 01

Key takeaways

Strategy

Private credit spreads widen to attractive levels while secondary market discounts create tactical opportunities across PE and infrastructure.

Liquidity

Liquid alts continue outpacing illiquid strategies, but wider secondary discounts favor patient capital with 3-5 year horizons.

Hedging

Elevated VIX and rising alts-equity correlation reduce diversification benefits; gold and commodities provide better tail risk protection.

§ 02

Executive summary

Private credit emerges as the week's standout opportunity with direct lending yields rising to 13.2% amid wider credit spreads. Secondary market discounts averaging 15-20% across PE and infrastructure signal tactical entry points for patient capital. However, elevated volatility (VIX 27.4) and rising correlations between alternatives and public markets challenge traditional diversification assumptions, favoring defensive positioning and real asset allocation.

§ 03

Market data

weekly snapshot

QMR MARKET BRIEF

Market posture

Week ending

Overall postureConstructive

Strategy Expanding · Liquidity Neutral · Hedging Defensive

Snapshot compiled Mar 27, 2026 · source dates vary

StrategyExpanding
LiquidityNeutral
HedgingDefensive

Inputs used

WTI crude$89.33+2.1% 1W
Gold$2,387.5+1.3% 1W
REIT index1,514.85-1.8% 1W
VIX27.44+3.2 pts 1W
HFRI composite2.4+0.3% 1W
§ 04

Strategy

20 points

Private equity

  • **Fundraising environment** Global PE dry powder at $2.3T with denominator effect easing as public markets stabilize; Preqin notes 'improving LP commitment pace' in Q1 2026
  • **Valuation trends** Median buyout entry multiples at 10.8x EV/EBITDA, down from 11.2x in Q4; Hamilton Lane sees 'sustained buyer's market in mid-market'
  • **Canadian activity** CPP Investments commits $2.8B to North American mid-market fund-of-funds; OTPP increases PE allocation target from 15% to 17%
  • **Exit pipeline** IPO backlog clearing with 31 PE-backed listings in Q1 vs 19 in Q4 2025; Goldman Sachs expects 'robust exit environment through 2026'
  • **Strategic positioning** Favor vintage 2024-2026 funds capturing cycle bottom; Cambridge Associates upgrades mid-market buyout from neutral to overweight

Private credit

  • **Direct lending yields** All-in yields rise to 13.2% (SOFR+825bps) from 12.1% in February; Ares notes 'most attractive entry point since 2009'
  • **Credit quality** Default rates stable at 1.8% vs 3.2% in broadly syndicated loans; Apollo highlights 'covenant protection advantage in downturn'
  • **Market dynamics** Bank lending standards tightening further drives private credit demand; KKR reports 'record origination pipeline' for Q2 2026
  • **Canadian presence** CDPQ allocates additional $1.5B to North American direct lending; Brookfield raises $12B opportunistic credit fund
  • **Positioning** Overweight direct lending and distressed credit; avoid stretched middle market deals above 6.5x leverage (Oaktree Capital)

Hedge funds

  • **Equity long/short** HFRI Equity Hedge Index up 2.4% YTD; dispersion widening as stock-picking environment improves
  • **Global macro** Currency and rates strategies outperform with 4.1% YTD returns; Goldman Sachs macro fund up 8.3% on yield curve positioning
  • **Systematic CTAs** Trend-following strategies gain 3.2% monthly on commodity momentum and FX volatility
  • **Multi-strategy** Citadel and Millennium continue to dominate flows; combined $15B net inflows in Q1 2026
  • **Canadian allocation** PSP Investments reduces hedge fund allocation from 8% to 6%; focuses on systematic and relative value strategies

Real assets

  • **Public REITs** Nasdaq REIT Index down 1.8% weekly to 1,514.85; average REIT yield at 4.6% vs 10-year Treasury at 4.2%
  • **Private real estate** NCREIF cap rates average 5.8%, up 40bps from Q4 2025; office sector stress continues with -12.3% annual returns
  • **Infrastructure assets** Digital infrastructure leading with 11.2% net returns; energy transition investments up 34% year-over-year (Preqin)
  • **Commodity exposure** WTI crude at $89.33 (+2.1% weekly); gold reaches $2,387.50 as geopolitical tensions support safe-haven demand
  • **Canadian positioning** Brookfield Infrastructure Partners announces $8B renewable energy expansion; BCI increases infrastructure allocation to 12%
§ 05

Liquidity

10 points

Access

  • **Liquid alternatives** Interval funds see $4.2B net inflows in March; private credit intervals leading with $2.1B monthly flows
  • **Semi-liquid vehicles** Tender offer funds launch accelerates; BlackRock files for monthly liquidity infrastructure fund
  • **Liquidity premium** Liquid alts trade at 150-200bps yield discount to illiquid equivalents; narrowing from 300bps in 2025
  • **Canadian landscape** New alternative investment fund rules drive product innovation; RBC GAM launches quarterly-liquid private credit fund
  • **Access recommendation** Favor liquid alts for tactical allocation; reserve illiquid vehicles for 5+ year strategic commitments

Secondaries

  • **Pricing trends** Secondary discounts average 18% to NAV across PE, widening from 12% in Q4 2025; infrastructure at 15% discount
  • **Transaction volume** $28B quarterly volume in Q1, up 23% year-over-year; Hamilton Lane reports 'seller urgency increasing'
  • **Deal composition** GP-led transactions represent 65% of volume; continuation funds dominate large deal flow
  • **Notable transactions** Brookfield's $3.2B infrastructure continuation fund; KKR's $1.8B multi-asset secondary portfolio sale
  • **Opportunity assessment** Secondary discounts signal tactical entry point; favor diversified secondary funds over single-asset deals
§ 06

Hedging

10 points

Volatility

  • **VIX environment** VIX at 27.44 (elevated regime) up from 24.2 previous week; options markets price continued uncertainty
  • **Correlation dynamics** Alts-to-equity correlation rises to 0.72 from 0.58 in Q4; diversification benefits diminishing in stress periods
  • **Commodity hedging** Gold at $2,387.50 provides effective tail risk hedge; oil exposure hedges inflation and geopolitical risk
  • **Real asset protection** Infrastructure and farmland maintain low correlation to financial assets; Nuveen emphasizes 'inflation-linked cash flows'
  • **Volatility positioning** Consider systematic vol strategies and commodity exposure for portfolio protection (CAIA Association research)

Tactical

  • **Liquidity management** Maintain 12-15% cash buffer for capital calls; private market deployment expected to accelerate in H2 2026
  • **Vintage diversification** Avoid concentration in 2021-2022 vintage years; focus on 2024-2026 vintage years for cycle timing
  • **Rebalancing triggers** Public market rally pushes alts below target; consider increasing allocation if below 15% for balanced portfolios
  • **Stress testing** Model alternatives performance in rates shock scenario; private credit and infrastructure most rate-sensitive
  • **Risk budgeting** Allocate 60% to defensive strategies (credit, infrastructure) and 40% to growth (PE, opportunistic) in current environment
§ 07

Institutional views

12 institutions

Institutional Perspectives

CPP Investments

allocator
bullish
Preferred: Private credit, Infrastructure, Mid-market PE
Avoid: Mega-cap buyout, Core real estate
Key Call: Increases PE allocation target to 17% and commits $2.8B to diversified PE fund-of-funds

Brookfield Asset Management

manager
bullish
Preferred: Infrastructure, Opportunistic credit, Renewable energy
Avoid: Office real estate
Key Call: Closes $12B opportunistic credit fund, largest in firm history

OTPP

allocator
neutral
Preferred: Natural resources, Infrastructure, Private credit
Avoid: Growth equity, Venture capital
Key Call: Maintains defensive positioning while increasing private credit allocation

Hamilton Lane

consultant
bullish
Preferred: Secondary funds, Mid-market PE, Direct lending
Avoid: Large-cap buyout, Core-plus real estate
Key Call: Secondary discounts create 'best entry point since 2009 financial crisis'

Cambridge Associates

consultant
neutral
Preferred: Private credit, Infrastructure, Diversified PE
Avoid: Hedge funds, Commodities
Key Call: Upgrades mid-market PE from neutral to overweight on valuation correction

Ares Management

manager
bullish
Preferred: Direct lending, Special situations, Infrastructure debt
Avoid: Liquid credit
Key Call: Direct lending yields at 13.2% represent 'most attractive entry point since 2009'

CDPQ

allocator
bullish
Preferred: Infrastructure, Direct lending, Private equity
Avoid: Hedge funds, Public REITs
Key Call: Commits additional $1.5B to North American direct lending strategies

BlackRock

manager
neutral
Preferred: Liquid alternatives, Infrastructure, Private credit
Avoid: Traditional hedge funds
Key Call: Launches liquid infrastructure strategy targeting monthly liquidity with 4-6% yield

Apollo Global Management

manager
bullish
Preferred: Private credit, Distressed debt, Real estate credit
Avoid: Public equity hedge funds
Key Call: Private credit default rates at 1.8% vs 3.2% in public markets highlight quality advantage

KKR

manager
neutral
Preferred: Direct lending, Infrastructure, Growth equity
Avoid: Distressed real estate
Key Call: Record origination pipeline for Q2 2026 as bank lending standards continue tightening

Preqin

consultant
neutral
Preferred: Private credit, Infrastructure, Secondary funds
Avoid: Venture capital, Growth equity
Key Call: Improving LP commitment pace signals denominator effect easing in Q1 2026

BCI

allocator
bullish
Preferred: Infrastructure, Real estate, Private credit
Avoid: Hedge funds, Commodities
Key Call: Increases infrastructure allocation to 12% from 10% targeting energy transition investments
§ 08

Portfolio implications

Portfolio Implications

Conservative

  • **Strategy focus**: 60% private credit and infrastructure, 25% real assets, 15% defensive hedge funds for income and stability
  • **Vehicle preference**: Liquid alternatives and interval funds for principal protection and quarterly access
  • **Hedging approach**: 5-10% gold allocation and energy infrastructure for inflation protection
  • **Canadian benchmark**: Target 20% alternatives allocation matching average Maple 8 pension defensive positioning

Balanced

  • **Strategy allocation**: 35% private credit, 25% private equity, 25% real assets, 15% hedge funds for diversified exposure
  • **Vehicle selection**: 70% illiquid drawdown funds, 30% liquid alternatives for liquidity management
  • **Risk management**: Maintain 12-15% cash buffer and avoid vintage year concentration in 2021-2022
  • **Canadian positioning**: 25% alternatives allocation with emphasis on infrastructure and mid-market PE

Growth

  • **Strategy overweight**: 40% private equity (mid-market focus), 30% opportunistic credit, 20% growth infrastructure, 10% systematic strategies
  • **Illiquid emphasis**: Target 5+ year lock-up strategies to capture illiquidity premium and cycle timing
  • **Opportunistic allocation**: Deploy into secondary funds and distressed opportunities at current discount levels
  • **Growth target**: 30% alternatives allocation with global diversification through Canadian pension co-investment platforms
§ 09

Key dates

5 events

Key Dates Ahead

DateEventRelevance
April 1Q1 private markets data releasePerformance and flow data for PE, credit, and real estate strategies
April 3Fed speech on credit marketsRate outlook impacts private credit spreads and real asset valuations
April 8CPP Investments Q4 resultsLargest Canadian pension alternatives performance and allocation updates
April 10EIA petroleum status reportOil inventory data affects energy infrastructure and commodity strategies
April 15Preqin Q1 fundraising dataPrivate equity and credit fundraising trends and dry powder levels
§ 10

Sources

8 sources

Sources & References