Q4 2026 Pulse Check: Private Markets Investment Themes

Direct Credit Investing

Access to the private credit market, emphasizing current yield with an aim toward downside protection

Learn More

• Deal activity: 2025 was a year of significant deal activity in which we reviewed more than 820 transactions totaling more than $32B, the highest volume since inception of our direct credit platform. Activity has remained strong in 2026, with more than $19B in transactions reviewed as of August 2026, representing an 18% YoY increase. 
• Funding gap: We continue to see strong demand tailwinds for private credit. As of Q2 2025, the funding gap between private equity buyout dry powder and private credit origination capacity was estimated at approximately $1.2T. When combined with the growing wall of upcoming loan maturities, this imbalance continues to support an ample deployment runway for private credit strategies.
• Market environment: Looking ahead, private credit's sustained deal flow drivers should continue to create robust deal momentum based on demand for incremental facilities, refinancings and upcoming maturities. 2025 demonstrated a modest pickup in change of control volume and we believe 2026 may see continued M&A activity. 
• Capital solutions: We anticipate ongoing demand for opportunistic capital solutions in structures such as HoldCo notes and preferred equity, which can offer investors favorable risk/return characteristics to support acquisitions and recapitalizations. 
• Market position: During times of uncertainty, there have historically been flights to quality, with private credit offering both yield and downside protection. In this environment, manager selection is critical. We believe scaled platforms with robust sourcing and investment discipline may be well positioned to deliver stable, consistent returns over the long term. 

Direct Equity Investing

Globally diversified platform targeting the SMID market with unique positioning

Learn More

• Dealmaking: Private equity dealmaking stabilized in Q3 after a soft Q2, though it remains selective. Q3 deal value rose ~8% quarter-over-quarter, following a Q2 decline. Year-to-date deal value is still modestly behind 2025, while deal count is up ~10%. Sponsors are transacting at a steady clip but favoring smaller, lower-risk structures, as higher-for-longer rates, wider financing spreads, software repricing tied to AI disruption and geopolitical volatility made sponsors more selective. Against that backdrop, our middle-market focus remains a differentiator. We continue to favor businesses operating in resilient sectors that offer multiple avenues for value creation – through operating performance, growth and exit optionality – and are nimbler from a capital structure standpoint, given lower purchase prices and leverage levels that make it easier to navigate periods of uncertainty.  
• Liquidity: The recovery in exits remains uneven, with realizations concentrated in a limited number of larger transactions rather than broad-based asset turnover. Only 18% of the 2021 buyout cohort has been monetized four years in, underscoring how much backlog needs to clear before liquidity normalizes. In this environment, our middle-market exposure remains valuable given the broader set of exit paths available, including strategic acquirors, financial sponsors and continuation vehicles.  
• Market position: Fundraising remains challenged and is on pace to roughly match 2025's muted total, with capital concentrating in fewer, larger funds. Despite broader fundraising activity being down, our 2025 direct equity deal flow significantly outpaced the prior year’s volumes, and direct equity deal flow for the year-to-date 2026 period is already up 36% compared to the same period in 2025. The challenging fundraising environment has led many GPs to seek relationships with strategic co-investment and direct equity investors that can provide efficient processes and meaningful capital. Through Q3 2026, Hamilton Lane deal flow featured opportunities involving 527 unique GPs, and approximately one-quarter of buyout deals reviewed were co-underwrite opportunities. We continue to source and receive deal flow from a diverse range of middle-market managers; through Q3 2026, 90% of deal flow received was within the middle market.  

Small / Emerging Managers

Early access and introductions to best-in-class emerging and diverse-led managers across primary funds and co-investment transactions

Learn More

Deal Flow

• New buyout fund formation remained muted in 1H 2026, consistent with the broader fundraising slowdown. That said, we are seeing increased pre-marketing activity from firms preparing for launches in 2H 2026 or early 2027, with a particular focus on securing anchor commitments ahead of broader fundraising efforts.
• Given the significant deployment of emerging manager capital between 2021 and 2024, a number of those firms are now showing strong early performance, including initial DPI, and have carried that momentum into successful raises for Fund II and Fund III. In several cases, meaningful support from existing LPs has helped compress fundraising timelines to less than six months.
• By contrast, managers that have deployed a substantial portion of fund capital but have not yet generated meaningful DPI are generally experiencing longer fundraising timelines, as many are waiting for additional asset seasoning and value creation before returning to market.

Co-investments

• Small-cap deal activity continued to grow in Q2 2026, with overall volume increasing approximately 32% year over year for the respective quarter. Emerging manager deal count remained consistent for the same period. Despite a continued volatile macro environment, our emerging and small cap co-investment activity continues to increase as we’ve increased our sourcing capability coverage across the platform.

Fund Investments

High-quality primary fund investments with often hard-to-access general partners

Learn More

• Investment quality: Deal flow continues to be more actionable and GPs remain optimistic that quality opportunities will continue through the remainder of 2026 and into 2027.  GPs have begun activating funds that may have been raised a year or more prematurely after deployment slowed significantly in 2024.  
• Equity:  Fundraising broadly continues to be slower than we have seen in some time. The patience demonstrated by managers to stretch out their investment horizon from funds raised in the c.2022 timeframe has translated to funds kicking the fundraising can from late 2025 to 2027 and some proactively from 2027 to 2028.  Despite the overall fundraising softness, high-quality groups with good DPI have been able to quickly fill allocation and wrap up their fundraises.  Anecdotally, exits have started to show a return to the valuation uptick at exit, particularly in more conservative middle market groups.  
• Credit: We have seen spreads widen modestly, by approximately 25–75 bps, over the past few months following the shift in market sentiment. The widening has been uneven across markets, with the largest differential at the upper end of the market, where there has been a pullback from large-cap managers that relied heavily on retail capital. These managers are still writing large checks but can no longer take down entire tranches themselves. M&A activity has also declined on the equity side, causing deal flow to slow somewhat. This, combined with higher base rates, is likely to keep spreads flat or push them slightly higher.   

Impact Investing

Seeking to deliver attractive returns while generating meaningful and measurable impact

Learn More

• Deal flow: Hamilton Lane Impact deal flow remained robust, with 2025 setting a new record with over $11B in total Impact opportunities reviewed. The Impact team continued to source deal flow from a diversified set of channels, including sponsors, operating businesses and advisors.  
• Oil price volatility: Recent volatility in oil and gas prices points to the potential benefits of Impact’s exposure to renewable energy and broader energy-transition themes. Many of our environmental investments benefit from long-duration, contracted revenues and regionally focused clean-energy and grid-services businesses, which tend to be less sensitive to commodity price swings while still participating in durable decarbonization and electrification tailwinds. 
• U.S. policy: Post‑OBBBA tax credit parameters and “begin construction” deadlines are more defined, and in some cases tighter, prompting investors to recalibrate underwriting and delivery schedules while the opportunity set across energy transition and efficiency remains substantial. Technology‑enabled and regionally focused businesses continue to benefit from durable demand drivers despite policy noise.
• Energy demand: A significant build‑out remains necessary to meet power needs from AI and data centers, and the U.S. administration continues to champion AI‑led growth. Industry participants expect near‑term supply shortfalls and heightened grid‑stability requirements. Interest in geothermal is accelerating given its stable, “always‑on” generation profile, which is suited to critical loads. Importantly, these aren’t just infrastructure plays; there is a meaningful private equity opportunity across services and operating companies that design, build and maintain critical systems (e.g., HV substation engineering for data centers, building‑efficiency upgrades, software and analytics), which help target markets improve reliability and efficiency. 

Infrastructure & Real Assets Investing

Access to primary, secondary and direct investments across infrastructure and natural resources

Learn More

• Asset class growth: Private infrastructure has grown ~25% annually for 25 years -- 2x the growth rate of private markets and 4x public equities, as of September 30, 2025. 
• Investor demand: 2025 was a record fundraising year, with oversubscribed funds and most LPs holding or increasing allocations into 2026. 
• SMID opportunity: While capital has concentrated in large and mega funds, the small/mid-market offers many attractive core-plus and value-add opportunities. 
• Return drivers: Returns are well balanced across sectors, with no single sector consistently driving or dragging returns. 
• Liquidity: Historically, small and mid-market funds have exhibited different deployment pacing, capital return profiles and liquidity characteristics relative to large/mega funds. 

Real Estate Investing

Seeking to deliver attractive, risk-adjusted returns across primary fund commitments and transactions within real estate

Learn More

• Geopolitical and macroeconomic impacts: The collapse of the U.S.–Iran ceasefire in early September, renewed Strait of Hormuz disruption, and ongoing tariff negotiations continue to weigh on commercial real estate through elevated construction costs, delayed leasing decisions, and reduced activity in trade-exposed markets. Despite these headwinds, investment activity remained broadly resilient through the first half of 2026, reflecting investor confidence that macro forces are not thesis-breaking; however, the Fed's 25 bps September rate hike adds pressure heading into Q4.
• Sector and market fundamentals: Across most property types, supply continues to moderate. 2026 multifamily deliveries are expected to fall ~28% from 2025 levels, and Q2 industrial completions reached a 10-year low. Demand has also accelerated, with Q2 multifamily net absorption nearly doubling quarter-over-quarter to 167,500 units, pushing vacancy down 50 bps to 4.3%. Correspondingly, values have begun to show upward momentum, with Green Street's Commercial Property Price Index up 5.0% YoY through August.  
• Capital markets: Non-agency CMBS issuance reached ~$91B through August, and Trepp now projects $136–140B of issuance for full-year 2026, a moderate increase from $126.6B in 2025. Despite a strong start to the year, the Fed's September 16 rate hike of 25 bps to 3.75–4.00%, its first since 2023, along with its projection of another increase by year-end, may slow issuances in Q4. Alternative lenders continued to capture the largest share of non-agency lending closings (38% in Q2), while agency originations fell 17% YoY even as total market originations rose 16%.  
• Investment activity: Q2 sales rose 14% YoY to $136.6B, and first-half activity hit $279.3B, up 23% from 2025. While primary gateway markets continue to post sharp gains, Northern Virginia and Dallas led all markets by transaction volume, driven by data center activity. In the multifamily space, ~60% of 2021–2022 vintage apartment loans are set to mature in H2 2026, and the CMBS delinquency rate sits at 8.02%, pointing to accelerating distress-driven sales ahead. 

Secondary Investing

A shorter duration complement to an overall private markets portfolio

Learn More

• Remarkable Growth: HL has screened ~$340B of deal flow through Q3 2026, on pace to surpass the record $369B reviewed in 2025 and nearly 2x total market volume. At $118B, 1H 2026 market volume grew 15% over 1H 2025 and is up 174% from $43B in 1H 2023. Approximately 2% of total private equity NAV is sold via secondaries each year. If that increased to 4%, it would double the size of the market.
• LP Interest Transactions: LP deals still anchor the market. They represented 47% of 1H 2026 volume. As portfolio management grows more sophisticated, secondaries serve as a rebalancing and liquidity tool. First-time sellers made up 40% of the market in 2025.
• GP-led and Complex Transactions: GP-led deals were ~53% of the $118B closed in 1H 2026, up from 24% in 2017. Single-asset continuation vehicles (CVs) made up 53% of GP-led volume and multi-asset CVs 33%. Today, high-quality GPs use CVs to hold onto their best performing “trophy” assets. The average asset MOIC prior to a CV is 4.3x.
• Stable Pricing: Average buyout pricing has held stable in the low 90s, but the range is wide: funds 0–3 years old trade at 96% of NAV on average versus 71% for funds 13+ years old. Younger funds are more likely to clear as sellers avoid the optics of large discounts. HL sees the best opportunities in fully invested 4- to 6-year-old funds with clear portfolio visibility, near-term distributions, and potential for value appreciation.
• Capital Overhang: It would take just 0.8 years to deploy all secondary dry powder, so the market remains undercapitalized despite sizable fundraising. This favors buyers, but relationships remain key to sourcing proprietary deals, where HL’s global platform, expertise, and technology provide an edge.

Venture Capital & Growth Equity Investing

Seeking to access top-tier venture and growth equity companies through funds, secondaries and direct investments

Learn More

• New rounds: 2026 remains a record year for deployment with YTD deal value in the U.S. reaching $515 billion, the highest on record.  Pacing eased in Q3, settling near pre-2026 norms as megarounds tapered, though deal count held near a record.  The market continues to stay top-heavy with $100M+ deals accounting for just 5% of all Q3 deal count but 75% of dollars raised.   
• Artificial intelligence: AI remains the dominant engine, commanding over 80% of all dollars raised in 2026.  We continue to see compute capacity as the largest constraint on growth as user demand grows and pilot programs convert to fully deployed long-term contracts.  We are also seeing revenue growth outperform expectations at top-quartile companies, cementing the strength of the category leaders. 
• GP fundraising: Fundraising momentum stayed strong, with managers raising over $100 billion across nearly 700 funds, which is nearly 40% higher than all of 2025.  Similar to the megadeal dynamic on the company side, most of the capital was raised by established managers with just one GP accounting for nearly 20% of all YTD LP capital raised.  
• Exit environment:  2026 has been a record year for exits at $2.3 trillion, though the headline value is dominated by the SpaceX IPO and subsequent acquisition of Cursor.  Even removing the SpaceX IPO, 2026 YTD exit value still overshadows all of 2025 exit value, with several large IPOs in the IPO pipeline still to come.