Q3 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 $13.4B in transactions reviewed as of July 2026, representing a 23% 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 entered 2026 on steadier footing than the 2025 slowdown, but momentum softened meaningfully in Q2 as higher-for-longer rate expectations, wider financing spreads, software repricing tied to AI disruption, and geopolitical volatility made sponsors more selective. Q2 PE deal value fell almost 28% quarter over quarter, even as transaction count held relatively firm, reflecting a market that is still transacting but skewing toward smaller, lower-risk structures. 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: Buyout fundraising has remained challenged and is currently on pace to be in line with 2025's muted total. 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 first half of 2026 is already up 33% compared to the same period in 2025. The challenging fundraising environment has led many GPs to seek relationships with strategic co-investment / direct equity investors that can provide efficient processes and meaningful capital. Year to date, Hamilton Lane deal flow featured opportunities involving 383 unique GPs, and approximately one-quarter of deals reviewed in 1H 2026 were co-underwrite opportunities. We continue to source and receive deal flow from a diverse range of middle-market managers; in 2026, 88% 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 substantialportionof fund capital but have not yet generated meaningful DPI aregenerally experiencinglonger fundraising timelines, as many are waiting foradditionalasset seasoning and value creation before returning to market.

Co-investments

• Small-cap deal activity continues 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 throughout the year. GPs have begun activating funds that may have been raised a year too early after deployment slowed significantly in 2024.
• Equity: Fundraising broadly is 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. Mid-market funds continue to have their moment, particularly those focused on businesses further outside of the software space. Value-oriented managers with a focus on “real economy” businesses are seeing an uptick in interest as LPs are seeking to complement their large software exposures with business that require physical inputs. Two managers, one mid-cap and one large-cap, are soft launching their fundraises and trending towards final closes earlier than anticipated. 
• Credit: The current macro environment has led to modest repricing upwards, even from deals in the works a few months ago. Software lending has stalled as groups continue to monitor the potential AI disruption. Credit secondaries have also slowed down as groups spend more time reevaluating the portfolios. The large groups that had significant dry powder through their retail channels now are writing smaller checks, which may result in deals turning to a club of lenders to fill the void. 

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 Iran conflict, shifting trade policy, and ongoing tariff negotiations continue to weigh on commercial real estate through elevated construction costs, delayed leasing decisions, and reduced activity in markets tied to transnational trade. Despite these headwinds, investment activity has remained broadly resilient, reflecting investor confidence that current macro forces are not thesis-breaking. 
• Sector and market fundamentals: Supply growth continues to moderate across major property types, with new deliveries declining from their 2023–2024 peak. Apartment deliveries are projected to fall from 2.2% of existing inventory in 2025 to 1.4% in 2026, and industrial deliveries from 1.8% to 1.3% over the same period. Leasing demand has remained healthy: multifamily net absorption rebounded to 78,100 units in Q1, driving vacancy down 20 basis points to 4.8%, while industrial net absorption reached 50.9 million square feet, the strongest first quarter since 2023. Operationally, NOI growth is improving across most sectors, with industrial REITs posting same-store NOI growth of 5.6% (a third consecutive quarter of acceleration), retail REITs at 3.8%, and office REITs recording their first positive NOI growth (+1.1%) in nine quarters.  
• Capital markets: H1 2026 CMBS issuance reached $70.1B, up 17.7% YoY, with full-year 2026 issuance forecast near $183B. However, renewed Middle East tensions pushed yields higher with markets now pricing meaningful odds of a Fed hike by year-end, reversing the prior cutting cycle. This keeps demand tilted toward floating-rate structures. Alternative lenders held 53% of non-agency closings in Q1; agency lending stayed strong, with Fannie/Freddie multifamily originations up 35% YoY.  
• Investment activity: Q1 sales rose 19% QoQ to $117.3B; trailing-four-quarter volume up 24% to $534B, led by retail and industrial. Gateway markets posted sharp gains (SF +48.3%, Chicago +39.5%, NY +37.6%). Within multifamily, approximately ~60% of 2021–2022 vintage apartment loans are set to mature in H2 2026, with foreclosures already at their highest midyear level since 2014, pointing to accelerating distress-driven sales ahead.

Secondary Investing

A shorter duration complement to an overall private markets portfolio

Learn More

• Record deal flow: Hamilton Lane saw a record $230B+ of deal flow in the first half of 2026, 20% higher than the first half of 2025. 2026 is on pace to surpass the record $369B of deal flow reviewed in 2025.  1H 2026 deal flow consisted of 43% LP deals and 57% GP-led/complex deals, a slight shift from the second half of 2025, which saw an even 50% split. 
• Strong volume: Official secondary market volume will be released by brokers in the coming weeks, but preliminary estimates put 1H 2026 on par or slightly ahead of the record volume seen in 1H 2025.
• Capital overhang: Growth in secondary market volume continues to outpace available buyside capital. At the end of 2025, the ratio of secondary dry powder to total market volume sits at 1.0x. This means that if there were no additional secondary dollars raised, dry powder would run out in a year. This is considerably lower than the broader buyout market where the capital overhang ratio is typically closer to 3.0x. This is a compelling dynamic for secondary buyers, who can be very selective. 
• Shifting pricing: Average pricing at the end of 2025 fell about 200 bps from 2024 to ~87% of NAV. The average vintage year of buyout funds traded in the past year was 2016, compared to 2018 in the prior year. This shift contributed to the softening in pricing compared to 2024 as older funds tend to trade at lower prices. Venture and growth funds saw the sharpest increase in pricing amidst a strong year for the sector primarily thanks to AI tailwinds, up-rounds, and the eye-popping growth of some of the world’s largest private companies. Hamilton Lane continues to average double-digit closing discounts, taking advantage of sourcing and information advantages to identify high-quality assets with embedded value and limited competition.
• Overall dynamics: As previously stated, secondaries had a record year in 2025 driven by strong growth in both the LP and GP-led segments. This accelerated growth was fueled, in part, by a continued challenged exit environment for private equity and GPs’ emphasis on generating DPI. While there was optimism heading into 2026 that exit activity would pick up materially, that has yet to be the case. The M&A market remains subdued and volatility continues to persist, fueled by AI disruption concerns and continued geopolitical tensions. As a result, at least for now, the forces that drove last year’s record levels of secondary activity remain in place.

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: Deal activity stayed near record in Q2, the second-highest quarter in the last decade behind Q1, with H1 deal value already surpassing all of 2025.  87% of dollars raised in megadeals ($100m+ rounds), and the quarter’s seven $1billion+ rounds totaled $87.2 billion.  Round sizes and valuations continue to push upward as large multi-stage funds have been aggressively paying up to concentrate earlier in high profile companies. 
• Artificial intelligence: AI remains the dominant fundraising engine, taking 86% of all the H1 capital invested. We continue to see a substantial divergence in growth and valuation step-ups between AI-native companies and prior-era software. The binding constraint remains in compute capacity and not end-user demand, creating challenges alongside real opportunities across the compute and infrastructure layer. 
• GP fundraising: Fundraising momentum stayed strong through H1 with GPs raising $72 billion across ~400 funds, nearly matching all of 2025 in dollars even as the number of funds raised fell.  Like prior quarters, LP capital concentrated in large, established multi-stage managers, who accounted for almost 90% of all the dollars raised in the U.S.  First-time funds and emerging managers captured a smaller portion of the market.  We expect this to continue as many firms raise their next funds.  
• Exit environment: Q2 set a record $1.8 trillion in exit value, driven almost entirely by the SpaceX IPO, excluding SpaceX, the traditional exit market mirrors prior quarters. IPO attention remains focused on the potential listing of OpenAI and Anthropic, both of whom have now been confidentially filed. As a result, the bar to go public remains higher than ever, driving continued GP/LP collaboration on alternative liquidity paths. With a constrained set of intelligent buyers and growing supply of deals, the tailwinds behind VC secondaries as a growing opportunity set remains.