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Alternatives

Private Credit Spreads Grind Tighter as Secondaries Volume Hits Record Pace

Issue 19Week ending July 19, 202615 sources

WTI crude79.20+1.1%
Gold3,452.00+0.6%
REIT index1,734.25+0.9%
VIX16.73-0.8pts
HFRI composite0.42+0.1%
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Week Ending July 19, 2026

Private Credit Spreads Grind Tighter as Secondaries Volume Hits Record Pace

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Key takeaways

Strategy

Private credit and secondaries remain the consensus overweights while mega-cap buyout multiples stay stretched; Canadian pensions are rotating dry powder toward mid-market direct lending and infrastructure.

Liquidity

Illiquidity premiums have compressed to decade lows in credit even as secondary discounts stay wide in real estate, favoring selective drawdown exposure over broad-based illiquid commitments.

Hedging

VIX sits in a normal 15-20 regime with rising alts-to-equity correlation, arguing for tactical gold and cash-buffer discipline rather than broad tail-risk overlays.

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Executive summary

Alternatives markets this week were defined by continued strength in private credit spreads, a record pace of secondary market transaction volume, and steady REIT performance as the VIX held in a normal 16-17 range. CPP Investments and Brookfield both flagged mid-market direct lending and infrastructure secondaries as the highest-conviction opportunities, while Cambridge Associates and Preqin noted private equity dry powder remains elevated at roughly $2.2 trillion with entry multiples still above historical medians. Advisors should watch for capital-call timing risk as vintage-year 2026 commitments accelerate and consider modest tactical gold exposure given rising equity-alts correlation.

§ 03

Market data

as of July 19, 2026

Market Snapshot

AssetLevelWeekly Change
WTI Oil$79.2+1.1%
Gold$3,452+0.6%
REIT Index1,734.25+0.9%
VIX16.73-0.8 pts
HFRI Composite0.42+0.1%

Market Sentiment

Strategy

Neutral

Liquidity

Neutral

Hedging

Neutral

§ 04

Strategy

20 points

Private equity

  • Fundraising pace Global PE dry powder sits near $2.2T, per Preqin's Q2 2026 update, which notes 'capital overhang persists even as deployment pace quickens in mid-market segments' (Preqin, July 2026)
  • Valuations Median North American buyout entry multiple holds at 11.4x EV/EBITDA versus a 12.8x 2022 peak, with Bain & Company-referenced data suggesting 'multiple compression has largely stabilized' (Cambridge Associates, July 2026)
  • Canadian activity OTPP committed a further $1.4B to global buyout secondaries this quarter while CPP Investments expanded co-investment capacity in mid-market industrials (OTPP News & Insights; CPP Investments Insights Institute, July 2026)
  • Exit environment PE-backed IPO count rose to 19 in Q2 2026 versus 11 in Q1, and Hamilton Lane's latest data shows the 'exit backlog easing but still elevated relative to 2018-2021 norms' (Hamilton Lane, July 2026)
  • Positioning Favor mid-market buyout, GP-led secondaries, and 2026-vintage commitments over large-cap buyout, where Cambridge Associates flags 'entry price discipline remains the key differentiator this cycle'

Private credit

  • Yields Direct lending all-in yields average 10.6%, a roughly 250bp premium to the leveraged loan index, per Ares Management's mid-year direct lending update (Ares Insights, July 2026)
  • Default rates Trailing 12-month direct lending default rate holds at 2.1%, down from 2.6% a year ago, with KKR noting 'credit quality stabilizing as rate relief filters through borrower cash flows' (KKR Insights, July 2026)
  • Deal terms Covenant-lite share of new direct lending deals fell to 61% from 68% in 2025, signaling improved lender leverage per PitchBook's private credit deal terms tracker (PitchBook, July 2026)
  • Canadian context PSP Investments and BCI have both expanded direct lending allocations, with Brookfield's Oaktree platform citing 'Canadian pension capital as a growing share of senior direct lending fund commitments' (BCI Insights; Brookfield Insights, July 2026)
  • Positioning Maintain overweight to senior direct lending and asset-based credit; Apollo's outlook flags 'spread compression argues for greater selectivity in sponsor-backed unitranche deals' (Apollo Insights, July 2026)

Hedge funds

  • L/S equity HFRI Equity Hedge strategies returned approximately 0.6% for the week and roughly 7.1% year-to-date, with Wellington noting 'stock-picking alpha has broadened beyond mega-cap tech names' (Wellington Insights, July 2026)
  • Global macro Macro strategies posted modest gains of 0.3% weekly amid range-bound rate expectations, with JPMAM flagging 'discretionary macro managers positioned cautiously into central bank meetings' (JPMAM Insights, July 2026)
  • Systematic/CTA Trend-following strategies are roughly flat year-to-date as choppy commodity and rate trends limit directional conviction, per Preqin's hedge fund strategy tracker (Preqin, July 2026)
  • Dispersion Cross-strategy return dispersion remains wide, with top-quartile multi-strategy funds outperforming bottom-quartile peers by over 900bps YTD, reinforcing manager selection importance (Cambridge Associates, July 2026)
  • Canadian context HOOPP and AIMCo both maintain measured hedge fund allocations, favoring multi-strategy platforms over single-strategy exposure for liquidity and risk-budgeting purposes (HOOPP News; AIMCo Insights, July 2026)

Real assets

  • REITs Nasdaq US Benchmark REIT Index closed at 1,734.25, up 0.9% on the week, with dividend yields averaging roughly 4.1% versus the 10-year Treasury near 4.3% (S&P Global, July 2026)
  • Private real estate NCREIF ODCE returns for Q1 2026 came in at 1.3% gross, the third consecutive positive quarter, with Greenstreet noting 'cap rates have plateaued near 6.2% across core sectors' (NCREIF; Greenstreet Advisors, July 2026)
  • Infrastructure Digital infrastructure and power transition deal flow remains robust, with OMERS Infrastructure closing a data center platform investment this quarter (OMERS News & Insights, July 2026)
  • Commodities WTI crude at $79.20/bbl (+1.1% weekly) and gold near $3,452/oz (+0.6% weekly), with Nuveen citing 'real assets continuing to provide inflation-hedging ballast amid tariff-related price pressures' (Nuveen Insights, July 2026)
  • Canadian context Brookfield Infrastructure highlighted continued capex acceleration in transmission and data infrastructure, while Canadian REITs trade at a modest discount to NAV versus U.S. peers (Brookfield Insights, July 2026)
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Liquidity

10 points

Access

  • Liquid alts Interval fund inflows totaled an estimated $3.8B in Q2 2026, led by private credit and real estate strategies, according to Franklin Templeton's alternatives flow update (Franklin Templeton Insights, July 2026)
  • Semi-liquid Blue Owl and Blackstone both reported continued growth in tender-offer fund AUM, with quarterly repurchase requests running below stated caps, signaling manageable redemption pressure (Blue Owl Insights; Blackstone Insights, July 2026)
  • Illiquidity premium Hamilton Lane estimates the illiquidity premium for direct lending has compressed to roughly 150-200bps over public credit, the lowest in several years (Hamilton Lane, July 2026)
  • Canadian landscape NI 81-102 liquid alternative fund AUM in Canada has grown steadily, with RBC GAM noting 'advisor adoption of liquid alts continues but remains concentrated in a handful of larger mandates' (RBC GAM Insights, July 2026)
  • Positioning Favor semi-liquid vehicles for private credit exposure given compressed illiquidity premiums; reserve full drawdown structures for secondaries and infrastructure where premium capture remains attractive

Secondaries

  • Pricing PE secondaries trade at an average 92% of NAV, tightening from 89% a year ago, while real estate secondaries remain wider at 81% of NAV, per Preqin's secondary pricing survey (Preqin, July 2026)
  • Volume Global secondary market volume reached approximately $76B in H1 2026, on pace for a record year, according to Hamilton Lane's mid-year secondaries report (Hamilton Lane, July 2026)
  • GP-led vs LP-led GP-led continuation vehicles now represent about 48% of total secondary volume, up from 42% last year, with Ares noting 'sponsors increasingly using continuation funds to extend hold periods on trophy assets' (Ares Insights, July 2026)
  • Notable deals OTPP participated in a $2.1B multi-asset continuation vehicle alongside a global buyout sponsor, one of the larger GP-led transactions closed this quarter (OTPP News & Insights, July 2026)
  • Positioning Real estate secondaries offer the widest discount-to-NAV opportunity currently, while PE secondaries pricing has normalized enough that selectivity now matters more than blanket allocation
§ 06

Hedging

10 points

Volatility

  • VIX regime VIX closed at 16.73, down 0.8 points on the week, remaining in the 'normal' 15-20 band per CBOE data, suggesting limited near-term hedging urgency (CBOE Insights, July 2026)
  • Alts correlation Correlation between listed alternatives (REITs, listed infrastructure) and public equities has drifted higher toward 0.65, reducing diversification benefits versus the historical 0.45-0.55 range (MSCI, July 2026)
  • Gold hedge Gold near $3,452/oz continues to serve as an effective tail hedge, with State Street noting 'gold allocations among institutional portfolios have risen modestly amid persistent geopolitical and fiscal uncertainty' (State Street Insights, July 2026)
  • Energy hedge WTI's move to $79.20 reinforces energy's role as an inflation hedge, though Goldman Sachs Asset Management cautions 'oil price upside is capped by ample non-OPEC supply growth' (GSAM Insights, July 2026)
  • Institutional view BlackRock's latest cross-asset note argues 'correlation between private and public risk assets is rising, and investors should not overstate alts' diversification benefit in a synchronized growth scare' (BlackRock Investment Institute, July 2026)

Tactical

  • Cash buffer Advisors should maintain a 5-10% liquidity buffer against unfunded PE and infrastructure commitments given accelerating capital call pace flagged by Cambridge Associates this quarter (Cambridge Associates, July 2026)
  • Vintage diversification Mercer recommends spreading commitments across at least three vintage years to avoid concentration risk as 2026 vintage deployment accelerates industry-wide (Mercer Insights, July 2026)
  • Rebalancing Strong public equity performance year-to-date has pushed many institutional alts allocations below target weights, prompting Callan to flag 'rebalancing flows into private credit and real assets likely over coming quarters' (Callan Insights, July 2026)
  • Tail risk A rate-spike scenario would pressure floating-rate direct lending borrowers and compress real estate valuations further, while a liquidity freeze would most affect semi-liquid vehicles reliant on continuous capital flows (Oaktree Insights, July 2026)
  • Positioning Keep vintage diversification intact, hold modest dry powder for capital calls, and treat gold/energy as the primary tactical hedges rather than broad alts de-risking given the still-normal VIX regime
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Institutional views

14 institutions

Institutional Perspectives

CPP Investments

allocator
neutral
Preferred: Mid-market direct lending, Infrastructure co-investments
Avoid: Large-cap buyout at peak multiples
Key Call: Expanded co-investment capacity in mid-market industrials while holding overall PE pacing steady

Brookfield Asset Management

manager
bullish
Preferred: Digital infrastructure, Transition/renewables credit
Avoid: Commodity-cycle-dependent resource equity
Key Call: Highlighted accelerating capex in transmission and data infrastructure as core secular theme

OTPP

allocator
bullish
Preferred: PE secondaries, GP-led continuation vehicles
Avoid: New large-cap buyout commitments
Key Call: Committed $1.4B to global buyout secondaries and joined a $2.1B multi-asset continuation vehicle

Ares Management

manager
bullish
Preferred: Senior direct lending, Asset-based credit
Avoid: Covenant-lite junior tranches
Key Call: Flagged growing Canadian pension capital share in senior direct lending fund commitments

KKR

manager
neutral
Preferred: Private credit, Infrastructure
Avoid: Cyclical mega-cap consumer buyout
Key Call: Noted default rate stabilization at 2.1% as rate relief filters through borrower cash flows

Apollo Global Management

manager
neutral
Preferred: Sponsor-backed unitranche (selective), Asset-based finance
Avoid: Broad unselective unitranche deployment
Key Call: Cautioned that spread compression argues for greater underwriting selectivity

PSP Investments

allocator
bullish
Preferred: Direct lending, Natural resources
Avoid: Illiquid real estate value-add
Key Call: Expanded direct lending allocation alongside BCI in senior credit strategies

BCI

allocator
neutral
Preferred: Direct lending, Core infrastructure
Avoid: Opportunistic real estate
Key Call: Increased direct lending exposure as part of broader private credit build-out

Cambridge Associates

consultant
neutral
Preferred: Mid-market buyout, 2026-vintage commitments
Avoid: Large-cap buyout at elevated multiples
Key Call: Flagged accelerating capital call pace and recommended vintage diversification across three-plus years

Preqin

consultant
neutral
Preferred: Secondaries, Private credit
Avoid: Overextended large-cap PE dry powder deployment
Key Call: Reported PE secondaries pricing tightened to 92% of NAV, signaling a healthier secondary market

Hamilton Lane

consultant
bullish
Preferred: GP-led secondaries, Real estate secondaries
Avoid: New illiquid real estate value-add commitments
Key Call: Projected 2026 secondary market volume on pace for a record year near $150B+

HOOPP

allocator
neutral
Preferred: Multi-strategy hedge funds, Core real estate
Avoid: Single-strategy directional hedge funds
Key Call: Maintained measured hedge fund allocation, favoring multi-strategy platforms for liquidity management

BlackRock

manager
neutral
Preferred: Private credit, Real assets
Avoid: Broad tail-risk alts overlays
Key Call: Warned rising private-public correlation reduces diversification benefit in a synchronized growth scare

Mercer

consultant
neutral
Preferred: Diversified private credit, Vintage-diversified PE
Avoid: Concentrated single-vintage commitments
Key Call: Recommended spreading commitments across at least three vintage years amid accelerating 2026 deployment
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Portfolio implications

Portfolio Implications

Conservative

  • Strategy focus: Emphasize senior direct lending and core real assets, both offering income with lower volatility per Ares and Nuveen data
  • Vehicle preference: Use semi-liquid interval and tender-offer funds for private credit access given compressed illiquidity premiums (~150-200bps per Hamilton Lane)
  • Hedging: Hold a 5-10% cash buffer against capital calls and a modest gold sleeve given rising alts-to-equity correlation near 0.65
  • Canadian: Benchmark private credit exposure against BCI/PSP allocations, which favor senior direct lending over opportunistic strategies

Balanced

  • Strategy mix: Blend mid-market PE, direct lending, core-plus infrastructure, and multi-strategy hedge funds to diversify return drivers
  • Vehicle mix: Combine semi-liquid vehicles for credit with selective drawdown commitments to secondaries, where discounts remain attractive at 81-92% of NAV
  • Hedging: Maintain vintage diversification across three-plus years per Mercer guidance and a modest tactical gold/energy hedge
  • Canadian: Reference OTPP and CPP Investments' co-investment and secondaries activity as a model for opportunistic mid-market exposure

Growth

  • Strategy tilt: Overweight PE secondaries and GP-led continuation vehicles, where volume is at a record pace near $76B in H1 2026
  • Vehicle preference: Lean into longer-lock-up drawdown funds to capture illiquidity premium in real estate secondaries, still discounted to 81% of NAV
  • Hedging: Use tactical volatility positioning opportunistically given the currently normal VIX regime (16.73) rather than static hedges
  • Canadian: Mirror Brookfield and OTPP's continuation vehicle participation for global diversification within growth-oriented alts sleeves
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Key dates

6 events

Key Dates Ahead

DateEventRelevance
July 22EIA Weekly Petroleum Status ReportOil inventory data could move WTI and energy infrastructure valuations
July 24Blackstone Q2 2026 EarningsAUM flows and fee-related earnings signal on private credit and real estate demand
July 28-29U.S. Federal Reserve FOMC MeetingRate path guidance directly affects direct lending yields and real asset cap rates
July 29Bank of Canada Rate DecisionImpacts Canadian private credit spreads and Maple 8 domestic real estate valuations
August 3KKR Q2 2026 EarningsUpdate on private credit and infrastructure fundraising pace and deployment
August 5NCREIF Q2 2026 Preliminary Data ReleaseConfirms whether ODCE returns extend recent positive quarterly trend
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Sources

15 sources

Sources & References