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Alternatives

Secondaries Boom and Credit Spreads Tighten as PE Cycle Turns

Private equity firms are finding it easier to sell older investments and return cash to investors, a sign this part of the market is picking back up. Meanwhile private lending still pays well, and gold and real estate both had a good week.

Issue 21Week ending August 2, 202623 sources

WTI crude84.25+2.6%
Gold3,385.40+0.8%
REIT index1,722.74+1.4%
VIX17.09-0.8pts
HFRI composite7.20+0.3%
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Week Ending August 2, 2026

Secondaries Boom and Credit Spreads Tighten as PE Cycle Turns

§ 01

Key takeaways

Strategy

Private equity exit activity and record secondaries volume signal the cycle is expanding again, though mega-cap buyout multiples remain rich relative to a still-cheap mid-market.

Liquidity

The illiquidity premium in direct lending and PE secondaries remains attractive even as liquid alts inflows hold steady; semi-liquid vehicles are the preferred middle ground for new commitments.

Hedging

A normal VIX regime and rising alts-to-public-equity correlation argue for holding real asset and gold hedges rather than adding incremental volatility protection.

§ 02

Executive summary

The alternatives market this week is defined by a reopening exit window and a secondaries market running at record pace, with Blackstone and KKR both flagging accelerating GP-led activity as evidence the private equity cycle is turning from contraction to expansion. Private credit yields held near 10.5% even as spreads compressed further, reflecting intensifying competition from banks re-entering leveraged lending. Gold pushed above $3,380/oz and REITs gained 1.4% on the week, both benefiting from a still-benign VIX near 17 and expectations the Fed's next move is a cut rather than a hike. Advisors should treat this as a window to add mid-market PE and secondaries exposure while maintaining real asset hedges.

§ 03

Market data

as of August 2, 2026

Market Snapshot

AssetLevelWeekly Change
WTI Oil$84.25+2.6%
Gold$3,385.4+0.8%
REIT Index1,722.74+1.4%
VIX17.09-0.8 pts
HFRI Composite7.2+0.3%

Market Sentiment

Strategy

Expanding

Liquidity

Neutral

Hedging

Neutral

§ 04

Strategy

20 points

Private equity

  • Fundraising pace Global PE dry powder sits at $2.0T, down from $2.1T a quarter ago as deployment outpaces new commitments; Preqin notes 'the denominator effect has fully unwound' (Preqin Q2 2026 Update, July 2026)
  • Valuations Median buyout entry multiple at 10.9x EV/EBITDA versus 12.8x at the 2022 peak, with Hamilton Lane calling mid-market pricing 'the most attractive since 2013' (Hamilton Lane Market Overview, July 2026)
  • Canadian activity OTPP committed a further $2.1B to co-investment vehicles alongside EQT and Blackstone in Q2, while CPP Investments closed a $3.4B direct buyout in industrials (OTPP News, July 2026; CPP Investments Insights Institute, July 2026)
  • Exit environment 31 PE-backed IPOs priced in Q2 2026 versus 19 in Q1, and Cambridge Associates reports distributions to LPs up 22% year over year, the strongest since 2021 (Cambridge Associates Research, July 2026)
  • Positioning Favor 2023-2025 mid-market vintages and secondaries over new large-cap buyout commitments, where multiples remain 150-200bps above the broader market (KKR Insights, July 2026)

Private credit

  • Yields Direct lending yields average 10.4%, roughly 380bps over the leveraged loan index, though Apollo notes the premium has compressed from 480bps a year ago as bank capital re-enters the market (Apollo Insights, July 2026)
  • Default rates Direct lending default rate holds at 3.1%, little changed on the quarter, with Ares reporting 'covenant breaches concentrated in 2021-vintage sponsor deals' rather than broad credit deterioration (Ares Insights, July 2026)
  • Deal terms Average spreads on new unitranche deals tightened to SOFR+525 from SOFR+575 in Q1, and covenant-lite structures now account for 61% of new originations (PitchBook Private Credit Report, July 2026)
  • Canadian context PSP Investments increased its private credit allocation target by 150bps to 9% of the portfolio, citing 'durable income with lower mark-to-market volatility than public credit' (PSP News Hub, July 2026)
  • Positioning Maintain overweight to senior direct lending over broadly syndicated loans, but favor managers with lower sponsor concentration as spread compression erodes the cushion for underwriting mistakes (Oaktree Insights, July 2026)

Hedge funds

  • L/S equity Average long/short equity fund returned 1.3% in July per early estimates, with gross exposure near cycle highs as dispersion within tech and healthcare supports stock-picking (HFR data cited via Wellington Insights, July 2026)
  • Global macro Macro funds are roughly flat for the month, with Wellington noting 'rate-cut timing uncertainty has whipsawed positioning across G10 rates desks' (Wellington Insights, July 2026)
  • Systematic/CTA Trend-followers are down modestly in July as choppy equity and rates trends reversed mid-month, reversing a strong first-half run (HFR CTA Index data, July 2026)
  • Dispersion Spread between top-quartile and bottom-quartile hedge fund managers widened to over 14 percentage points year-to-date, reinforcing the case for manager selection over broad beta exposure (Cambridge Associates Research, July 2026)
  • Canadian context AIMCo trimmed its systematic/CTA sleeve by roughly 100bps in favor of event-driven and multi-strategy managers, citing 'a more attractive risk-reward in credit-linked event books' (AIMCo Insights, July 2026)

Real assets

  • REITs Nasdaq US Benchmark REIT index closed at 1,722.74, up 1.4% on the week and now yielding roughly 3.9%, a narrower but still positive spread over the 10-year Treasury (FRED, July 30, 2026)
  • Private real estate NCREIF ODCE preliminary Q2 2026 return was 1.8%, the third straight positive quarter, with Nuveen noting 'cap rates have stabilized in the 6.0-6.5% range across core sectors' (Nuveen Insights, July 2026)
  • Infrastructure Brookfield closed its latest global infrastructure vehicle above target at $17.5B, with digital infrastructure and power transmission cited as the largest allocations (Brookfield Insights, July 2026)
  • Commodities WTI crude rose 2.6% on the week to $84.25/bbl on OPEC+ supply discipline, while gold gained 0.8% to roughly $3,385/oz on continued central bank buying (FRED, July 27, 2026; World Gold Council data via Kitco)
  • Canadian context Brookfield Infrastructure Partners reaffirmed 2026 FFO growth guidance of 8-9%, and Canadian REITs broadly tracked the US benchmark higher on the back of falling long bond yields (Brookfield Insights, July 2026)
§ 05

Liquidity

10 points

Access

  • Liquid alts US liquid alternative mutual funds and ETFs took in an estimated $3.2B in July, the fourth straight month of inflows, led by multi-strategy and managed futures products (Morningstar-sourced data cited by Franklin Templeton Insights, July 2026)
  • Semi-liquid Tender-offer and interval fund launches continued, with Blue Owl and Blackstone both expanding non-traded BDC and credit vehicles targeting monthly subscriptions and quarterly redemptions (Blue Owl Insights, July 2026)
  • Illiquidity premium Hamilton Lane estimates the current illiquidity premium for drawdown PE at roughly 300-350bps over public equities, still above the long-run average despite tighter secondaries pricing (Hamilton Lane Insights, July 2026)
  • Canadian landscape The NI 81-102 liquid alts market has grown to over CAD $28B in AUM, with Mackenzie and CI Global Asset Management both launching new liquid credit and multi-strategy funds this quarter (Mackenzie Investments Insights, July 2026)
  • Positioning Favor semi-liquid vehicles for new alternative commitments to balance the illiquidity premium against redemption flexibility, reserving fully drawdown structures for high-conviction secondaries and infrastructure (Franklin Templeton Insights, July 2026)

Secondaries

  • Pricing PE secondaries traded at an average 92% of NAV in Q2 2026, up from 88% a year ago, with infrastructure secondaries pricing even tighter at 95-97% of NAV (Preqin Secondaries Report, July 2026)
  • Volume Global secondaries transaction volume hit a record $76B in H1 2026, up 34% year over year, per Jefferies data cited by KKR (KKR Insights, July 2026)
  • GP-led vs LP-led GP-led continuation vehicles now represent 54% of total secondaries volume, up from 45% two years ago, as sponsors extend hold periods on trophy assets (Blackstone Insights, July 2026)
  • Notable deals Blackstone closed a $2.6B continuation vehicle for a healthcare services platform, while CPP Investments participated as a lead LP investor in a $1.8B infrastructure continuation fund (Blackstone Insights, July 2026; CPP Investments Insights Institute, July 2026)
  • Positioning Narrowing discounts suggest the distressed-selling window has largely closed; advisors should treat secondaries now as a portfolio construction tool for vintage diversification rather than a pure discount play (Cambridge Associates Research, July 2026)
§ 06

Hedging

10 points

Volatility

  • VIX regime VIX closed at 17.09, down 0.8 points on the week and squarely in the 'normal' 15-20 band, consistent with low realized volatility across major equity indices (CBOE, July 30, 2026)
  • Alts correlation Correlation of hedge fund composite returns to the S&P 500 has risen to roughly 0.65 over the trailing 12 months, up from 0.55 a year ago, per HFR data cited by Mercer (Mercer Insights, July 2026)
  • Gold hedge Gold at roughly $3,385/oz is up over 28% year to date, with the World Gold Council attributing continued strength to central bank reserve diversification rather than acute crisis demand (Kitco/World Gold Council data, July 2026)
  • Energy hedge WTI's move to $84.25 on OPEC+ discipline reinforces the case for a modest commodity sleeve as an inflation hedge, though Goldman Sachs Asset Management flags 'limited further upside without a supply shock' (GSAM Insights, July 2026)
  • Institutional view BlackRock's alternatives team argues rising public-private correlation 'reduces but does not eliminate' the diversification case for alts, favoring uncorrelated strategies like reinsurance and trade finance (BlackRock Investment Institute, July 2026)

Tactical

  • Cash buffer Advisors should maintain 12-18 months of expected capital calls in cash or short duration instruments, consistent with Callan's guidance for a maturing PE and private credit program (Callan Insights, July 2026)
  • Vintage diversification With 2026 shaping up as a strong vintage per Hamilton Lane's entry multiple data, avoid over-concentrating commitments in a single vintage year and instead ladder across 2025-2027 (Hamilton Lane Insights, July 2026)
  • Rebalancing Strong public equity and REIT performance has pushed many balanced portfolios' alts allocation below target by 100-200bps; this is a natural window to top up illiquid commitments at attractive entry pricing (Mercer Insights, July 2026)
  • Tail risk A rate-spike scenario would pressure floating-rate direct lending borrowers' interest coverage most acutely, while a liquidity freeze would widen secondaries discounts fastest in real estate and venture-adjacent PE (Oaktree Insights, July 2026)
  • Positioning Keep gold and core infrastructure as the primary tail-risk ballast, use semi-liquid vehicles to preserve optionality, and avoid adding net new leverage-heavy mega-cap buyout exposure at current multiples (Apollo Insights, July 2026)
§ 07

Institutional views

13 institutions

Institutional Perspectives

Brookfield Asset Management

manager
bullish
Preferred: Infrastructure, Real estate transition capital
Avoid: Mega-cap buyout at peak leverage
Key Call: Closed $17.5B global infrastructure fund above target, largest allocation to digital infrastructure and power transmission

CPP Investments

allocator
neutral
Preferred: Infrastructure secondaries, Direct buyout
Avoid: Broad systematic/CTA
Key Call: Led $1.8B infrastructure continuation vehicle as LP, alongside a new $3.4B direct industrials buyout

Blackstone

manager
bullish
Preferred: Secondaries, Private credit
Avoid: Broadly syndicated leveraged loans
Key Call: Closed $2.6B healthcare continuation vehicle, cites GP-led secondaries as 54% of total market volume

Cambridge Associates

consultant
neutral
Preferred: Mid-market buyout, Secondaries
Avoid: Late-vintage 2021 mega-buyout
Key Call: LP distributions up 22% year over year, the strongest recovery in distribution activity since 2021

EQT Partners

manager
neutral
Preferred: Infrastructure, European mid-market buyout
Avoid: US mega-cap buyout
Key Call: Co-investing alongside OTPP and Blackstone in a $2.1B industrials platform

Ontario Teachers'

allocator
bullish
Preferred: Infrastructure, Natural resources, Co-investment
Avoid: Passive fund-of-funds PE
Key Call: Committed a further $2.1B to co-investment vehicles in Q2 2026

Apollo Global Management

manager
bullish
Preferred: Direct lending, Asset-based finance
Avoid: Unhedged floating-rate borrower exposure at high leverage
Key Call: Notes private credit spread premium over public loans has compressed to roughly 380bps from 480bps a year ago

Preqin

consultant
neutral
Preferred: Secondaries, Mid-market credit
Avoid: First-time fund managers in a contracting fundraising environment
Key Call: Global PE dry powder fell to $2.0T as deployment now outpaces fresh commitments

KKR

manager
bullish
Preferred: Secondaries, Mid-market buyout
Avoid: Large-cap buyout at current multiples
Key Call: Cites record $76B in H1 2026 global secondaries volume, up 34% year over year

CDPQ

allocator
neutral
Preferred: Real estate, Infrastructure
Avoid: Systematic macro
Key Call: Holding infrastructure allocation steady near target while reviewing real estate office exposure

Mercer

consultant
neutral
Preferred: Private credit, Event-driven hedge funds
Avoid: Mega-cap buyout, Trend-following CTA
Key Call: Flags rising 0.65 correlation between hedge fund composite returns and public equities over the trailing year

Hamilton Lane

consultant
bullish
Preferred: Mid-market buyout, 2025-2027 vintage diversification
Avoid: Concentrated single-vintage commitments
Key Call: Calls current mid-market entry multiples 'the most attractive since 2013' at 10.9x EV/EBITDA

AIMCo

allocator
neutral
Preferred: Event-driven, Multi-strategy hedge funds
Avoid: Systematic/CTA
Key Call: Trimmed CTA sleeve roughly 100bps in favor of event-driven and multi-strategy allocations
§ 08

Portfolio implications

Portfolio Implications

Conservative

  • Strategy focus: Emphasize private credit and core real assets (infrastructure, REITs) over PE and hedge fund beta, targeting yield stability over capital appreciation (Nuveen Insights, July 2026)
  • Vehicle preference: Use liquid alts and interval funds for core exposure, reserving no more than 20-25% of the alts sleeve for drawdown structures
  • Hedging: Maintain a 12-month cash buffer against any residual capital call exposure and hold gold at 3-5% of the total portfolio as tail-risk ballast
  • Canadian: Benchmark private credit and infrastructure weights against HOOPP and PSP's real asset-heavy approach, which target 25%+ combined allocations (PSP News Hub, July 2026)

Balanced

  • Strategy mix: Diversify across mid-market PE, direct lending, infrastructure, and selective hedge fund strategies (event-driven, multi-strategy) rather than concentrating in any single sleeve
  • Vehicle mix: Blend semi-liquid tender-offer funds for credit and real assets with drawdown vehicles for PE and infrastructure to manage both liquidity and the illiquidity premium
  • Hedging: Moderate tail-risk hedging via a gold allocation of 3-5% plus modest commodity exposure, with correlation monitoring given the rise in hedge fund-to-equity correlation
  • Canadian: Reference the Maple 8 blended alts allocation of roughly 45-55% of total AUM as a directional benchmark, recognizing most retail portfolios will run materially lower (CPP Investments Insights Institute, July 2026)

Growth

  • Strategy tilt: Overweight mid-market PE and secondaries where entry multiples and NAV discounts remain attractive, while using continuation vehicles opportunistically for vintage diversification
  • Vehicle preference: Favor longer lock-up drawdown funds to capture the 300-350bps illiquidity premium Hamilton Lane estimates versus public equities
  • Hedging: Use tactical volatility positioning selectively given VIX in the normal range, rather than paying for persistent tail-risk protection
  • Canadian: Access global secondaries and infrastructure co-investment through the same GPs (Brookfield, EQT, Blackstone) that Maple 8 pensions are committing alongside, where available in Canadian-domiciled feeder vehicles
§ 09For the conversation, not the committee

Client talk track

Private equity firms are finding it easier to sell older investments and return cash to investors, a sign this part of the market is picking back up. Meanwhile private lending still pays well, and gold and real estate both had a good week.

Does this mean it's a good time to invest in private equity?

It's an encouraging sign the market is turning, but the mid-market looks more reasonably priced than the big, well-known deals.

Should I be worried about my private credit or bond-like investments?

No, those investments are still paying attractive income even though banks are competing harder for the same loans.

Why did gold and real estate do well this week?

Calm markets and expectations that the Federal Reserve will cut interest rates helped both gold and real estate investments this week.

Bottom lineThe conversation worth having is whether it makes sense to add some new private equity or private lending exposure now that exits are picking up, while keeping a small gold or real asset cushion in place. Clients already holding these positions likely have no changes to make.

§ 10

Key dates

6 events

Key Dates Ahead

DateEventRelevance
August 4ISM Services PMI (July)Services strength feeds into rate-cut timing, a key driver for private credit spreads and REIT valuations
August 6-7EIA Weekly Petroleum Status ReportInventory data will inform whether the WTI move to $84.25 has further legs or reverses
August 12US CPI (July)Inflation surprise could reprice Fed cut odds, directly affecting direct lending floating-rate income and REIT discount rates
August 14-17US REIT Q2 earnings season continuesWatch occupancy and same-store NOI trends for confirmation of the ODCE stabilization narrative
August 21-23Jackson Hole Economic SymposiumFed commentary on the rate path is a key swing factor for private credit spreads and real asset valuations into year-end
August 25NCREIF Q2 2026 final data releaseConfirms preliminary ODCE return of 1.8% and updates cap rate detail by property sector
§ 11

Sources

23 sources

Sources & References