Q1 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

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• 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 so far in 2026, having reviewed over $10B in transactions, a 23% increase YoY.*
• 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. 

*Deal flow volume is not indicative of investment performance. 

Direct Equity Investing

Globally diversified platform targeting the SMID market with unique positioning

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• Deal-making: Private equity dealmaking rebounded in 2025 after a slow start to the year. While the first half was plagued with an escalation of trade tensions that drove market uncertainty and a pause on deal activity, renewed investor confidence, a clearer economic outlook, lower rates and increased dry powder underpinned U.S. PE activity in 2025, which was up 6% by count over 2024. 2025 gave way to a 2026 environment marked by greater uncertainty, but still generally steady footing for PE. With our dedicated focus on the middle market, our platform has been well positioned to deploy capital despite a challenging environment. We concentrated on middle-market businesses, particularly in service-oriented sectors that were relatively insulated from broader global trade policy disruptions. These companies 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: 2025 saw a rebound in exit activity, which has remained muted in recent years. While still below the historical PE average rate of distribution, buyout distributions saw their second consecutive year of growth, signaling that improved market sentiment should continue to drive an increase in exit activity. Our Direct Equity activity benefited from this environment, particularly given our focus on the middle market, where there is greater optionality around exit (strategic acquirors, financial buyers and continuation vehicles).
• Market position: Buyout fundraising dropped again in 2025, with numbers that are now on par with what the industry was raising in 2016. Despite broader fundraising activity being down, our 2025 direct equity deal flow significantly outpaced prior year’s volumes. 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. In 2025, Hamilton Lane deal flow featured opportunities involving 563 unique GPs, and ~40% of deals reviewed in 2025 were co-underwrite opportunities. We continue to source and receive deal flow from a diverse range of middle market managers; in 2025, 81% of deal flow received was within the middle market.

Emerging Managers

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

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• Liquidity: Overall sentiment around liquidity remains largely unchanged. As in prior years, limited partners entered 2026 with expectations for a pickup in distributions; however, the macro backdrop has resulted in a more gradual recovery than initially anticipated. As a result, the liquidity environment remains consistent with recent quarters, with capital calls continuing to outpace distributions. That said, there are early signs of progress. GPs are taking a more measured and disciplined approach to continuation vehicles as a tool for generating liquidity. While these structures are becoming more thoughtfully executed, LPs generally continue to favor traditional exit pathways, particularly when evaluating emerging managers with less established track records.
• Fundraising: Fundraising timelines for emerging managers continue to extend, with average raise periods now approaching two years. While a small subset of managers has been able to close efficiently, the broader market remains highly competitive, with many GPs facing prolonged fundraising cycles. For LPs, this environment presents certain advantages. Longer timelines allow for more thorough diligence, including evaluation of early portfolio construction, as well as increased leverage in negotiating terms. In many cases, this has also reduced blind pool risk, enabling more informed underwriting decisions. 
• Co-investments: Small-cap deal activity showed continued improvement in Q1 2026, with overall volume increasing approximately 12% year-over-year. Emerging manager deal count rose at a similar pace, up roughly 13% over the same period, and remained a consistent share of total small-cap activity at approximately 45%. Against this backdrop, our co-investment activity has increased significantly. We have invested in nearly 4x as many deals compared to Q1 2025. This reflects the continued maturation of our program, as well as enhanced sourcing capabilities through our growing network of strong emerging managers. These relationships may provide access to differentiated opportunities that we believe offer compelling risk-adjusted return potential.

Primary Fund Investing

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

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• Investment quality: GPs have noted that there is a noticeable pickup in activity. It feels like the tides are turning and GPs are optimistic that the M&A environment will finally pick back up, particularly as 2020 and 2021 vintage funds hit the 5+ year mark for some assets and are either seeking liquidity or new financing options as maturities come due. 
• AI uncertainty: AI has become a must to discuss at LPAC and Annual Meetings; not just how the portfolio or employees within the GP’s four walls are considering using AI, but what is being done already and how are the businesses positioning themselves for success in an environment where everyone is operating at full speed.
• Equity: 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. 
• 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

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• 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

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• 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.

*Past growth rates are not indicative of future performance. Growth metrics reflect asset class AUM, not investor returns.

Real Estate Investing

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

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• Geopolitical and macroeconomic impacts: Central banks have moved from rapid tightening to a more measured easing cycle, and policy rates are expected to trend even-to-slightly lower through 2026. Macroeconomic uncertainty remains elevated, largely driven by the ongoing war in Iran, shifting trade policy and continued tariff negotiations putting upward pressure on inflation. Even so, the combination of gradual rate relief and generally healthy property-level fundamentals should support a level of investor confidence as conditions continue to evolve.
• Sector and market fundamentals: After two years of declining returns across the real estate markets, we are seeing valuations turn the corner, with the NCREIF ODCE Index posting seven consecutive quarters of positive total returns through Q1 2026. While appreciation growth is still limited, continued positive valuation increases serve as a sign that the market has entered a recovery phase. Outsized supply delivered over the last few years is still pressuring certain property sectors and markets; however, higher financing and construction costs have materially reduced new starts since 2024. Completions are expected to decline across most major property types in 2026, allowing supply/demand dynamics to normalize over time.  
• Capital markets: Lending volumes have shown signs of returning to pre-pandemic levels and real estate debt spreads narrowed through the second half of 2025 into 2026, supported by improving real estate fundamentals. Originations increased across all major sectors, with retail, office and data centers leading the way. With lenders returning to the market at increasingly competitive spreads, we expect momentum across capital markets to continue to strengthen into 2026. However, lender risk appetite continues to remain uneven by property type and transaction size.  
• Investment activity: U.S. commercial real estate investment volume increased by 29% year-over-year in Q4 2025 to $172 billion, while annual volume increased by 22% to $499 billion. Single asset sales increased 10% year-over-year, while portfolio sales, excluding data centers, rose 21% year-over-year. Transaction volume reached $66 billion in Q1 2026, in line with Q1 2025 figures.

Secondary Investing

A shorter duration complement to an overall private markets portfolio

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• Solid deal flow: We screened $369B of deal flow in 2025, surpassing the previous record set in 2024 by 35%. Over the past five years, the volume of deals we have reviewed has been ~2x what actually closed in the market, on average. 
• Record volume: With record deal flow came record volume. Per Jefferies, total secondary market volume surpassed the $200B mark for the first time, coming in at approximately $240B. This was a 48% increase from the record set last year. Volume accelerated in the second half of the year, growing 33% over 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 dynamic has allowed some secondary buyers to be more selective in the opportunities they pursue.  
• Shifting pricing: Average pricing 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 significant growth of some of the world’s largest private companies.
• Overall dynamics: LPs continue to seek liquidity in a muted exit environment and are using the secondary market as a portfolio balancing tool. First-time sellers represented 40% of the LP interest market in 2025, highlighting the broadening seller universe. GP-Led volume grew 55% over the prior year driven by more dedicated pools of capital to GP-leds and continued high-quality supply. Many GPS are using continuation vehicles to offer liquidity while retaining the upside on their favorite assets. Nearly 80% of the top 100 GPs have now completed a continuation vehicle. We have also taken advantage of market uncertainty during 2025, and continue today, with structured transactions such as preferred equity solutions. GPs seek partners that have the scale and experience to execute customized structured transactions designed to align interests among stakeholders. We expect these trends could continue into 2026 and support elevated levels of activity in the secondary market.

Venture Capital & Growth Equity Investing

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

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• New rounds: Deal activity started 2026 at a near‑record pace, with Q1 generating near‑record quarterly deal value and putting the year on pace to approach 2025 levels. The majority of that capital went into the five largest, mostly AI‑related rounds rather than a broad‑based recovery across the market. Across stages, round sizes and pre‑money valuations have moved higher and GPs are leaning harder into their pro‑rata, drawing down increase levels if their undrawn commitments each quarter to support perceived category leaders. 
• Artificial intelligence: AI remains the dominant engine of venture activity, accounting for roughly half of all Q1 206 deals and the vast majority of capital deployed.  We are seeing substantial divergence in revenue growth and product adoption between AI-native companies vs the prior era of software companies.  Across the ecosystem, the constraints emerging often compute capacity rather than end-user demand, creating challenges around access to resources but also create meaningful opportunities for investors to support the buildout and innovation around the compute and infrastructure layer.   
• GP fundraising: Through Q1 2026, managers had raised nearly as much capital as all of 2025, but most of the capital raised went to a small group of large, established multi-stage managers whose fundraises carried over into the new year.  The trajectory of GP fundraising is expected to continue with many firms in active processes now to raise their next funds.   
• Exit environment: Q1 2026 saw record value, largely helped by the closing of Google’s acquisition of Wiz and a handful of other AI-driven strategic deals.  The traditional IPO window remains effectively focused on the three potential mega-listing of SpaceX, OpenAI and Anthropic, while most companies still face a high bar for going public.  As a result, GPs and LPs continue to collaborate on alternative ways of generating liquidity through the secondary market.  Still with a limited set of buyers that can intelligently transact in this space, it remains a growing opportunity set.