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Alternatives

AI Boom Widens Public-Private Gap as Private Credit Keeps Growing

Stock markets have been booming, but private equity funds are stuck in a slow patch, taking longer than usual to sell investments and return cash to investors. Meanwhile, private lending keeps attracting big new money.

Issue 23Week ending August 16, 202624 sources

WTI crude84.77+9.62%
Gold (monthly average)4,073.00-3.67%
REIT index1,703.59+0.13%
VIX14.63-0.52pts
Financial stress-2.78-0.02pts
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Week Ending August 16, 2026

AI Boom Widens Public-Private Gap as Private Credit Keeps Growing

§ 01

Key takeaways

Strategy

Private credit and infrastructure keep absorbing fresh institutional capital while core buyout fundraising remains stuck in a multi-year distribution drought; exits and IPOs are the swing factor to watch.

Liquidity

Secondary market growth and a wave of new interval-fund launches are widening access to illiquid strategies, though discounts to NAV in real estate and venture secondaries show pricing has not fully normalized.

Hedging

A 14.63 VIX print looks calm, but rising stock-bond correlation and a widening public-private return gap argue for keeping diversifiers rather than reading low volatility as an all-clear signal.

§ 02

Executive summary

Alternatives this week are defined by a widening gap between roaring public markets and a private equity complex still working through a multi-year distribution drought. Blackstone's mid-year outlook flagged corporate PE realizations of more than $25 billion across 2025 and 1Q26 alongside a reopening IPO window, while Cambridge Associates warned the fundraising slowdown born of 2021-era vintages will extend into a fourth year. Hedge funds just posted their best quarter since Q4 2020, even as CDPQ reported private equity returns of -4.3% versus an 8% benchmark, underscoring how concentrated the public rally has become. Private credit keeps attracting capital, led by BCI's new $13 billion investment-grade fund, while a 14.63 VIX signals calm that may understate correlation risk building beneath the surface.

§ 03

Market data

weekly snapshot

QMR MARKET BRIEF

Market posture

Week ending

Overall postureConstructive

Strategy Expanding · Liquidity Bullish · Hedging Neutral

Snapshot retrieved Aug 15, 2026, 11:12 p.m. EDT · source dates vary

StrategyExpanding
LiquidityBullish
HedgingNeutral

Inputs used

WTI crude$84.77+9.62% 1W
Gold (monthly average)$4,073-3.67% 1M
REIT index1,703.59+0.13% 1W
VIX14.63-0.52 pts 1W
Financial stress-2.782-0.02 pts 1W
§ 04

Strategy

20 points

Private equity

  • Fundraising pace Preqin pegs global PE dry powder near $3.7 trillion entering 2026, describing the asset class as on 'a cautious path to recovery' with large-ticket deal-making improving (Preqin Global Reports 2026).
  • Valuations CDPQ CEO Charles Emond said private-asset valuation multiples have fallen more than 15% over the past few years while public market multiples rose over 50%, widening the public-private gap.
  • Canadian activity CPP Investments is targeting roughly C$20 billion of new PE deployment while weighing LP-led secondary sales to 'trim older exposure,' per global PE head Caitlin Gubbels.
  • Exit environment Blackstone reports corporate PE fund realizations over $25 billion across 2025 and 1Q26, with industry-wide 2026 US IPO proceeds forecast near $160 billion across roughly 100 listings.
  • Positioning Cambridge Associates flags the distribution drought and fundraising slowdown extending into a fourth year in 2026; favor secondaries and selective mid-market over broad new buyout commitments.

Private credit

  • Yields Ares Co-Heads describe a persistent 200-400bps premium over liquid credit (bank loans, high yield) across cycles, with US portfolio companies showing double-digit earnings growth.
  • Scale Blackstone's BCRED has delivered a 9.9% net return since inception, outperforming leveraged loans by over 350bps, within a $443 billion Credit & Insurance platform inside Blackstone's $1.3 trillion total AUM.
  • Deal terms Apollo's credit platform reached $849 billion of AUM as of June 30, 2026; its mid-year outlook argues private investment-grade credit is essential to closing the AI financing gap.
  • Canadian context BCI launched an Investment Grade Private Credit Fund targeting $13 billion of deployment over three years, opening with $1.8 billion of co-investment commitments alongside its $22.2 billion Principal Credit Fund.
  • Positioning Blackstone sees asset-based finance, a roughly $30 trillion market where banks still hold about 90% of exposure, as the next growth leg, offering spread premiums near 250bps over corporate lending.

Hedge funds

  • Composite performance Hedge funds posted their best quarter since Q4 2020, up roughly 6.4% in Q2 2026, before cooling to -1.1% in July as tech-related equity hedge strategies pulled back.
  • Diversification case Blackstone's mid-year outlook notes stock-bond correlations have been positive more often than at almost any point in two decades, weakening the traditional 60/40 hedge.
  • Positioning shift KKR argues for rotating from a 60/40 stock-bond mix toward a 40/30/30 blend of Private Equity, Real Assets, and Private Credit given structurally higher rates and fewer bond hedging benefits.
  • Dispersion Elevated cross-asset dispersion from divergent monetary policy paths and AI-driven equity concentration is creating a 'target-rich environment' for fundamental and macro strategies (Blackstone).
  • Canadian context CDPQ's Vincent Delisle noted just over a third of S&P 500 names outperformed the index in H1 2026, the kind of narrow-leadership market macro and dispersion strategies are built to exploit.

Real assets

  • REITs The Nasdaq US Benchmark REIT Index sits at 1,703.59 (Aug 14, 2026), holding steady as managers flag early-cycle green shoots in select property types.
  • Private real estate Blackstone notes new US construction starts down 60% from peak, Link Logistics same-store leasing volumes rising, and New York office vacancy falling from 21.5% to 14.5%.
  • Infrastructure Brookfield Infrastructure posted Q2 2026 FFO of $702 million ($0.89/unit), up 10% year-over-year, with data-segment FFO up 36% and midstream up 17%, prompting a raised quarterly distribution.
  • Commodities Gold traded near $4,375-4,400/oz in mid-August, up roughly 31% year-over-year per Trading Economics; WTI at $84.77/bbl remains elevated on Middle East conflict risk.
  • Canadian context CDPQ's infrastructure portfolio returned 7.2% in H1 2026, its second-best first half in a decade, though it trailed its own 12.7% benchmark as public markets outran private valuations.
§ 05

Liquidity

10 points

Access

  • Liquid alts Interval fund AUM has grown to roughly $214 billion across 182 funds, with alternative-asset managers now the dominant sponsor group (XA Investments, June 2026).
  • Semi-liquid Blackstone's evergreen private-wealth platforms (BREIT, BCRED, BMACX) remain the reference point for advisors accessing real estate, credit, and multi-asset strategies without full drawdown lock-ups.
  • New launches RBC Global Asset Management launched the RBC BlueBay Enhanced Income Fund, a closed-end interval fund giving US investors access to CLOs and alternative credit markets.
  • Canadian landscape Since the NI 81-102 alternative-fund rules, Canada's liquid alts market remains smaller than the US interval-fund space; RBC GAM's launch is a notable recent cross-border entry.
  • Positioning The illiquidity premium still favors drawdown vehicles for PE and secondaries, but a slower PE distribution environment argues for topping up liquid credit sleeves for near-term ballast.

Secondaries

  • Pricing Jefferies data cited by Goldman Sachs Asset Management shows secondary pricing recovering to roughly 81% of NAV across strategies, led by buyout near 87%, with credit, real estate, and venture near 71-72%.
  • Volume Blackstone estimates annual secondary market volume grew from roughly $23 billion in 2010 to about $250 billion in 2025, a tenfold rise that still represents under 2% of total private-market AUM.
  • GP-led vs LP-led CPP Investments is weighing LP-led secondary sales to trim older fund exposure even as it keeps deploying fresh primary PE capital, per global PE head Caitlin Gubbels.
  • Notable deals CPP Investments has been marketing a multi-billion-dollar private equity fund-interest portfolio, one of the larger LP-led processes currently in market.
  • Positioning With turnover still under 2% of AUM and discounts narrowing rather than widening, secondaries read as a maturing, opportunistic sleeve rather than a distress signal.
§ 06

Hedging

10 points

Volatility

  • VIX regime VIX sits at 14.63, solidly in the low-volatility regime (under 15), signaling limited near-term hedging demand from public-equity investors.
  • Alts correlation Blackstone's mid-year outlook flags stock-bond correlations positive more often than at almost any point in two decades, eroding the diversification benefit alternatives are meant to provide.
  • Gold hedge Gold has traded near $4,375-4,400/oz in mid-August, up over 31% year-over-year per Trading Economics, with the rally linked partly to central-bank buying and geopolitical hedging demand.
  • Energy hedge WTI at $84.77/bbl sits well above KKR's own ~$60 base case for 2026, with Blackstone citing the war as the key driver of both energy prices and interest rates.
  • Institutional view KKR expects more volatile bond yields and 'fewer hedging benefits' from fixed income than in past cycles, favoring real assets and private credit to fill the gap.

Tactical

  • Cash buffer With PE distributions still lagging capital calls per Cambridge Associates' multi-year drought thesis, advisors should keep 12-18 months of call coverage in liquid sleeves before layering new drawdown commitments.
  • Vintage diversification Cambridge Associates traces today's distribution drought to 2021-era vintages, arguing for steady, programmatic commitments across 2025-2026 vintages rather than concentrated re-ups.
  • Rebalancing CDPQ's H1 2026 results show public equity up 14.6% against a private equity portfolio down 4.3%, a reminder that public rallies can quietly push blended alts weights below policy targets.
  • Tail risk A resumption of Middle East escalation or a rate-path reversal would hit WTI ($84.77) and duration-sensitive real assets together; private credit's floating-rate, senior structure is the more insulated sleeve.
  • Positioning Favor asset-based and investment-grade private credit for ballast, use secondaries as the liquidity valve, and treat macro/dispersion hedge fund sleeves as the explicit correlation hedge given weakening 60/40 diversification.
§ 07

Institutional views

12 institutions

Institutional Perspectives

Blackstone

manager
bullish
Preferred: AI-linked infrastructure, Private credit, Hedge funds
Avoid: Unhedged long-duration public bonds
Key Call: Calls 2026 'the year of the IPO' with US IPO volume up six-fold and corporate PE realizations above $25 billion since 2025.

Cambridge Associates

consultant
neutral
Preferred: Secondaries, Selective early-stage VC
Avoid: Broad new large buyout commitments
Key Call: Sees the post-2021 distribution drought and fundraising slowdown extending into a fourth year in 2026.

KKR

manager
neutral
Preferred: Private equity, Real assets, Private credit
Avoid: Traditional duration-heavy 60/40 fixed income
Key Call: Recommends rotating from 60/40 to a 40/30/30 mix of PE, real assets and private credit given structurally higher rates.

Apollo Global Management

manager
bullish
Preferred: Investment-grade private credit, Asset-backed finance
Key Call: Credit platform AUM reached $849 billion; argues private IG credit is essential to closing the AI financing gap.

Ares Management

manager
bullish
Preferred: Middle-market direct lending, Asset-light service businesses
Avoid: Internationally exposed supply-chain-heavy credits
Key Call: Reports double-digit earnings growth across US portfolio companies and a sustained 200-400bps premium over liquid credit.

Goldman Sachs Asset Management

manager
neutral
Preferred: Secondaries
Key Call: Cites Jefferies data showing secondary pricing recovering to roughly 81% of NAV across strategies.

Preqin

consultant
neutral
Preferred: Large-ticket buyout (selectively)
Key Call: Pegs global PE dry powder near $3.7 trillion, describing 2026 as 'a cautious path to recovery.'

Brookfield

manager
bullish
Preferred: Digital infrastructure, Midstream energy
Key Call: Infrastructure arm posted 10% FFO/unit growth and raised its distribution on 36% data-segment and 17% midstream FFO growth.

CPP Investments

allocator
neutral
Preferred: Private equity, Secondaries
Avoid: Older, harder-to-exit fund vintages
Key Call: Targeting roughly C$20 billion of new PE deployment while exploring LP-led secondary sales to trim older exposure.

CDPQ (La Caisse)

allocator
neutral
Preferred: Infrastructure, Public equities
Avoid: Private equity marked to stale benchmarks
Key Call: H1 2026 return of 5.1% (vs 7.5% benchmark); private equity down 4.3% against an 8% benchmark, infrastructure up 7.2%.

BCI

allocator
bullish
Preferred: Investment-grade private credit, Asset-backed finance
Key Call: Launched a $13 billion Investment Grade Private Credit Fund, extending its $22.2 billion Principal Credit platform.

Ontario Teachers' (OTPP)

allocator
neutral
Preferred: Infrastructure, Direct private equity
Key Call: Net assets of $279.4 billion as of Dec 31, 2025, with alternatives at roughly 22% of the total portfolio.
§ 08

Portfolio implications

Portfolio Implications

Conservative

  • Strategy focus: Emphasize investment-grade and asset-based private credit plus core infrastructure over PE beta, given Cambridge Associates' distribution-drought thesis.
  • Vehicle preference: Use interval and evergreen structures, such as RBC GAM's new BlueBay CLO interval fund, for quarterly-liquidity access to credit.
  • Hedging: Keep 12+ months of capital-call cash covered in short-duration liquid credit given a 14.63 VIX and rising stock-bond correlation.
  • Canadian: Track OTPP-style allocations, roughly 20-22% alternatives weighted toward credit and infrastructure rather than buyout.

Balanced

  • Strategy mix: Blend mid-market PE and secondaries, IG and asset-based private credit, contracted infrastructure, and macro/dispersion hedge funds.
  • Vehicle mix: Pair drawdown secondaries funds with interval funds and evergreen credit vehicles for staggered liquidity.
  • Hedging: Add a moderate 5-10% hedge fund/macro sleeve to offset the stock-bond correlation Blackstone flags in its mid-year outlook.
  • Canadian: Mirror a CPP/CDPQ-style diversified alts weight split across PE, infrastructure and credit, accessed via Canadian dealer platforms and US interval funds.

Growth

  • Strategy tilt: Overweight PE secondaries and GP-led continuation vehicles while the distribution drought persists, leaning into AI-adjacent infrastructure like data centers and power.
  • Vehicle preference: Use longer-lock drawdown funds and continuation vehicles to capture discount-to-NAV entry points, with buyout secondaries still trading near 87% of NAV.
  • Hedging: Keep tail-risk hedging tactical and catalyst-driven around known events rather than static, given the low 14.63 VIX print.
  • Canadian: Use CPP/BCI-style direct and co-investment access to global infrastructure and private credit for lower-fee, larger-scale exposure.
§ 09For the conversation, not the committee

Client talk track

Stock markets have been booming, but private equity funds are stuck in a slow patch, taking longer than usual to sell investments and return cash to investors. Meanwhile, private lending keeps attracting big new money.

Should I be worried my private equity investments aren't paying out?

It's a broader industry slowdown affecting many funds, not a sign something is wrong with yours specifically.

Markets seem calm right now, does that mean it's safe to stop worrying?

Calm markets can hide risks building underneath, so it's not a signal to drop protective diversification.

Is private lending a safer bet right now than private equity?

Private credit is attracting a lot of new institutional money, but every strategy carries its own tradeoffs worth discussing.

Bottom lineThe conversation worth having is about patience versus access: clients with money tied up in private equity funds are the ones facing a longer wait for payouts, while those exploring private credit are seeing strong institutional interest. Neither is a red flag on its own, but it's a good week to review how each fits your timeline and comfort with the current calm-but-not-guaranteed market backdrop.

§ 10

Key dates

5 events

Key Dates Ahead

DateEventRelevance
Aug 20EIA Weekly Petroleum Status ReportFresh US crude inventory data will test whether WTI holds above $84 amid Middle East risk premium.
Aug 21-23Jackson Hole Economic SymposiumFed commentary here typically moves rate-cut odds, a key input for private credit spreads and REIT cap rates.
Late AugustQ2 REIT and REIT-adjacent earnings tailRemaining US and Canadian REIT reports will confirm whether the office-vacancy improvement Blackstone flagged is broadening.
Early SeptemberOMERS and PSP Investments mid-year resultsAdditional Maple 8 data points to confirm whether the CDPQ-style public/private return gap is a sector-wide pattern.
SeptemberFOMC meetingRate path guidance is central to KKR's 'fewer bond hedging benefits' thesis and to private credit spread compression.
§ 11

Sources

24 sources

Sources & References