Coller Capital’s latest Barometer suggests attention is shifting from increasing allocations to selecting managers, managing liquidity and refining portfolio construction.
Private markets investors remain committed to the asset class despite ongoing geopolitical uncertainty and concerns around private credit. However, Coller Capital’s latest Global Private Capital Barometer suggests the focus of institutional investors is changing.
Rather than simply increasing allocations, LPs are becoming more selective about manager relationships, more active in portfolio management and increasingly reliant on secondary market solutions to manage liquidity.
The survey of 108 LPs, which collectively oversee more than $2 trillion of assets, found commitment plans remain resilient. One-third of respondents expect to accelerate their rate of commitments to private markets over the next two years, while a further 57% expect commitment levels to remain unchanged.
At the same time, investors appear to be taking a more discerning approach to manager selection. Almost a quarter (23%) of LPs expect to reduce the number of GP relationships across their portfolios over the next three years, up from 16% when Coller last asked the question in 2020. While some investors continue to expand their manager rosters, the findings suggest capital is increasingly being concentrated among higher-conviction relationships.
Geopolitics is also becoming a more important consideration, particularly outside North America. Nearly half of European and Asia-Pacific respondents said geopolitical developments are influencing allocation decisions more than in the past. Yet the survey suggests investors are responding not by retreating from private markets, but by becoming more selective about where they deploy capital.
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That trend is particularly evident in private credit. The proportion of LPs planning to increase private credit allocations over the next 12 months has fallen from 42% in the previous Barometer to 29%. On the surface, that may appear to signal weakening enthusiasm for one of private markets’ fastest-growing asset classes.
A closer look, however, paints a more nuanced picture. Despite the slowdown, 87% of respondents still expect to maintain or increase their private credit allocations. Meanwhile, investors appear increasingly focused on manager quality and portfolio construction rather than broad exposure to the asset class.
The report found recently established private credit managers face a more challenging fundraising environment than in previous years, with investors showing a stronger preference for established relationships. The findings suggest private credit may be entering a more mature phase of development, where manager selection matters more than simply gaining exposure to the market.
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Liquidity management is another area where investor behaviour appears to be evolving. Continuation vehicles, once viewed primarily as a response to subdued exit markets, are increasingly becoming part of the industry’s permanent infrastructure. Two-fifths of LPs expect continuation vehicle activity to continue growing even if traditional exit conditions improve, while a further 29% expect activity levels to remain unchanged.
The findings support a broader shift in how investors view secondaries. Rather than serving as a temporary solution during periods of market stress, secondary transactions are increasingly being used as portfolio management tools that allow investors to generate liquidity, rebalance exposures and maintain access to favoured assets.
Private credit secondaries were identified as the asset class most likely to experience the strongest proportional growth over the next three years, reflecting both the continued expansion of private credit and growing demand for flexible liquidity solutions.
Taken together, the Barometer’s findings point to a private markets industry entering a more mature phase. Institutional investors remain committed to the asset class, but the emphasis is shifting. Increasingly, it is deciding which managers to back, how to manage liquidity and where capital can be deployed most effectively.