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Alternatives

Private Credit Yields Hit 11.5% as Secondary Discounts Signal Opportunity

Issue 18Week ending June 14, 202610 sources

WTI crude95.00+3.8%
Gold2,385.00-1.2%
REIT index1,694.84+2.1%
VIX19.44-2.3pts
HFRI composite142.80+0.8%
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Week Ending June 14, 2026

Private Credit Yields Hit 11.5% as Secondary Discounts Signal Opportunity

§ 01

Key takeaways

Strategy

Private credit offering highest risk-adjusted returns at 11.5% yields while PE secondary discounts of 15-20% create vintage year entry opportunities.

Liquidity

Semi-liquid interval funds capturing 60% of liquid alt flows as investors seek illiquidity premium without full drawdown commitment.

Hedging

VIX normalization to 19.4 and declining alts-equity correlation to 0.62 restore diversification benefits after Q1 volatility spike.

§ 02

Executive summary

Private credit dominates alternatives flows with direct lending yields reaching 11.5% amid continued bank retrenchment. PE secondary markets show 15-20% discounts to NAV, creating vintage year opportunities as exit activity normalizes. Canadian pensions led by CPP Investments and OTPP increase infrastructure allocations targeting energy transition assets, while Brookfield closes record $15B renewable infrastructure fund.

§ 03

Market data

weekly snapshot

QMR MARKET BRIEF

Market posture

Week ending

Overall postureConstructive

Strategy Expanding · Liquidity Neutral · Hedging Risk On

Snapshot compiled Jun 12, 2026 · source dates vary

StrategyExpanding
LiquidityNeutral
HedgingRisk On

Inputs used

WTI crude$95+3.8% 1W
Gold$2,385-1.2% 1W
REIT index1,694.84+2.1% 1W
VIX19.44-2.3 pts 1W
HFRI composite142.8+0.8% 1W
§ 04

Strategy

20 points

Private equity

  • Fundraising pace Global PE dry powder at $2.3T, up 8% QoQ as denominator effect eases with public market recovery (Preqin Q2 2026)
  • Secondary discounts Average 15-20% discount to NAV across vintages, widest since 2020; Hamilton Lane sees 'best entry point in 3 years'
  • Exit environment IPO pipeline strengthens with 31 PE-backed offerings in Q2 vs 18 in Q1; Goldman projects $180B exit volume in H2
  • Canadian activity CPP Investments commits $2.8B to mid-market buyout funds; OTPP targets 25% PE allocation by 2027 vs current 22%
  • Positioning Favor 2026-2027 vintage secondaries and mid-market buyout over mega-cap; Cambridge Associates upgrades PE to overweight

Private credit

  • Yields Direct lending yields reach 11.5% (SOFR+650bp) vs 9.2% high yield bonds; widest spread since 2009 (Ares Capital)
  • Default rates Private credit defaults at 1.8% vs 3.4% for broadly syndicated loans; credit selection advantage persists (Oaktree)
  • Deal terms Covenant-lite loans drop to 45% of private credit vs 85% in public markets; stronger lender protections (Apollo)
  • Bank retrenchment Regional bank commercial lending down 12% YoY, creating $200B+ opportunity for private lenders (KKR)
  • Canadian context CDPQ increases credit allocation to 18% of portfolio; Brookfield Credit closes $4.2B fund with Canadian pension backing

Hedge funds

  • L/S equity HFRI Equity Hedge up 4.8% YTD vs 12.1% S&P 500; alpha generation challenged by low dispersion environment
  • Global macro Currency and rates strategies outperform with 7.2% YTD returns on central bank divergence (HFRI Macro Index)
  • Event-driven M&A activity revival drives 6.1% YTD returns; deal spreads tighten as regulatory approval accelerates
  • Systematic CTAs Trend-following strategies up 3.4% YTD on commodity momentum and rate volatility (HFRI Systematic)
  • Canadian allocators OTPP reduces hedge fund allocation to 8% from 11% as alternatives focus shifts to private markets

Real assets

  • REITs Public REITs yield 4.2% vs 10-year Treasury at 4.8%; cap rates stabilizing at 6.1% after 200bp rise (NCREIF Q1 2026)
  • Private real estate ODCE returns turn positive at +1.4% in Q1 after four negative quarters; transaction volume up 35% QoQ
  • Infrastructure Energy transition capex hits $1.2T globally; digital infrastructure valuations at 12.5x EV/EBITDA (Brookfield)
  • Commodities WTI crude at $95/bbl on supply concerns; gold retreats to $2,385 as real yields rise to 2.1%
  • Canadian exposure BCI increases renewable infrastructure to 8% of portfolio; Canadian apartment REITs outperform on immigration demand
§ 05

Liquidity

10 points

Access

  • Interval funds $47B in net flows YTD, 60% of liquid alt inflows; average 12-month liquidity vs quarterly for tender offers
  • Evergreen structures Blackstone BREIT, Starwood SREIT see $8B combined outflows as NAV volatility concerns persist
  • Illiquidity premium Private equity shows 290bp annual premium vs liquid alts; private credit premium narrows to 180bp
  • Canadian landscape 34 interval funds now available post-NI 81-102; RBC launches private credit interval fund targeting 9% yield
  • Access trade-offs Semi-liquid vehicles capture 78% of performance vs illiquid but maintain quarterly+ liquidity windows

Secondaries

  • GP-led volume GP-led transactions comprise 65% of secondary volume vs 35% LP-led; single-asset deals dominate at $42B YTD
  • Pricing trends Traditional secondaries at 82-85% NAV, improvement from 75-80% in Q4 2025; pricing power shifts to sellers
  • Transaction pipeline $95B secondary volume projected for 2026 vs $78B in 2025; Evercore expects record year
  • Dry powder Secondary fund dry powder at $186B, 2.1x coverage ratio suggests continued pricing pressure on sellers
  • Canadian activity PSP Investments allocates $1.5B to secondary opportunities; Hamilton Lane Canada launches CAD-denominated fund
§ 06

Hedging

10 points

Volatility

  • VIX regime At 19.4, within normal range (15-20); term structure positively sloped suggesting stable forward volatility expectations
  • Correlation breakdown Alts-equity correlation drops to 0.62 from 0.78 peak in March; diversification benefits restored (CAIA)
  • Gold positioning Despite -1.2% weekly decline, maintains role as tail hedge with -0.23 beta to equities over 12 months
  • Commodity hedging Energy allocation provides inflation protection as breakevens rise to 2.8% on geopolitical tensions
  • Volatility timing Cambridge Associates recommends maintaining 3-5% cash buffer given potential Q3 redemption pressures

Tactical

  • Capital call pacing PE capital calls accelerate to $187B in Q2 vs $142B in Q1; maintain 15-18 month liquidity buffer
  • Vintage diversification Avoid concentration in 2021-2022 vintages; favor 2024-2026 vintage years for entry valuations
  • Rebalancing triggers Public equity gains push alts below 20% target for 40% of institutional portfolios; consider rebalancing
  • Stress scenarios Rate spike to 6%+ would pressure real estate and infrastructure valuations by 15-20% (Mercer analysis)
  • Risk budgeting Concentrate illiquidity risk in highest-conviction strategies; maintain liquid alternatives for tactical flexibility
§ 07

Institutional views

12 institutions

Institutional Perspectives

CPP Investments

allocator
bullish
Preferred: Infrastructure, Private credit
Avoid: Public REITs
Key Call: Increasing infrastructure allocation to 12% by 2028, focused on energy transition and digital assets

Brookfield Asset Management

manager
bullish
Preferred: Infrastructure, Real estate
Avoid: Commodities
Key Call: Infrastructure valuations attractive at 11-12x EBITDA vs 15x+ peak; favor renewable energy

Ontario Teachers' (OTPP)

allocator
neutral
Preferred: Private equity secondaries, Private credit
Avoid: Hedge funds
Key Call: Reducing hedge fund allocation to 8% from 11% to increase private market exposure

Cambridge Associates

consultant
bullish
Preferred: Private credit, PE secondaries
Avoid: Core real estate
Key Call: Upgrading private equity to overweight on secondary market opportunities and exit normalization

Apollo Global Management

manager
bullish
Preferred: Direct lending, Distressed credit
Avoid: Growth equity
Key Call: Private credit market could reach $3.5T by 2028 as bank lending capacity remains constrained

CDPQ

allocator
bullish
Preferred: Private credit, Infrastructure
Avoid: Venture capital
Key Call: Targeting 18% allocation to private credit by end-2026 vs current 14%

Blackstone

manager
neutral
Preferred: Private credit, Tactical opportunities
Avoid: Core private equity
Key Call: Expect 18-24 months of volatile performance in semi-liquid real estate products

Hamilton Lane

consultant
bullish
Preferred: PE secondaries, Co-investments
Avoid: Late-stage VC
Key Call: Secondary market offers best PE entry opportunity in 3 years at 15-20% discounts

Preqin

consultant
neutral
Preferred: Infrastructure, Natural resources
Avoid: Growth equity
Key Call: Infrastructure fundraising on pace for record $200B+ in 2026 driven by energy transition

KKR

manager
bullish
Preferred: Private credit, North America PE
Avoid: European PE
Key Call: Regional bank retrenchment creates $200B+ annual opportunity for private credit through 2028

BCI

allocator
bullish
Preferred: Renewable infrastructure, Private credit
Avoid: Commodities
Key Call: Doubling renewable infrastructure allocation to 8% of portfolio by 2027

Oaktree Capital

manager
neutral
Preferred: Distressed credit, Special situations
Avoid: Core private equity
Key Call: Credit cycle remains benign but positioning for opportunities as leverage peaks in 2024-2025 vintages
§ 08

Portfolio implications

Portfolio Implications

Conservative

  • Strategy focus: 60% private credit, 25% real assets, 15% hedge funds for stable yield and capital preservation
  • Vehicle preference: Interval funds and tender offer structures providing quarterly-to-annual liquidity windows
  • Hedging approach: Maintain 20% cash buffer and gold allocation for tail risk protection in volatile environment
  • Canadian allocation: Follow Maple 8 benchmark of 15-18% alternatives with bias toward infrastructure and private credit

Balanced

  • Strategy diversification: 35% private credit, 30% private equity, 20% real assets, 15% hedge funds across vintage years
  • Liquidity management: 70% illiquid drawdown funds, 30% semi-liquid vehicles for tactical rebalancing flexibility
  • Risk management: Moderate secondary allocation (15%) for portfolio vintage diversification and opportunistic entry
  • Geographic mix: 60% North America, 25% Europe, 15% Asia-Pacific following institutional best practices

Growth

  • Growth orientation: 45% private equity (including secondaries), 30% private credit, 15% growth infrastructure, 10% tactical
  • Illiquidity acceptance: Favor drawdown structures for full illiquidity premium capture in PE and infrastructure
  • Opportunistic positioning: 25% allocation to 2026-2027 vintage secondaries at 15-20% NAV discounts
  • Return targeting: 12-15% net IRR expectation with acceptance of higher volatility and longer lock-up periods
§ 09

Key dates

5 events

Key Dates Ahead

DateEventRelevance
June 17FOMC DecisionRate guidance impacts real assets and private credit valuations
June 19Brookfield Infrastructure Investor DayEnergy transition investment pipeline and return expectations
June 20NCREIF Q1 Real Estate ReturnsPrivate real estate performance benchmark and cap rate trends
June 21Russell Index ReconstitutionREIT index changes affect public real estate allocations
June 24CAIA Alternative Investment ConferenceInstitutional allocator sentiment and strategy preferences
§ 10

Sources

10 sources

Sources & References