By Alexandra Voss, CFA at SEB: Private markets are no longer in retreat, but the rebound is selective and unevenly distributed. Returns were positive across most strategies in 2025, although lower than in the previous year. Dealmaking rebounded and fundraising may well have troughed yet distributions remain well below historical averages and capital continues to concentrate in fewer managers. This article is a brief exerpt from the annual edition of SEB Manager Selection’s Private Markets Report, where we review each strategy, reflect on 2025, and share perspectives on navigating the uncertainties of 2026. 

2025 in review

We begin by comparing our 2025 expectations with actual outcomes, this time with some help from AI. Claude AI reviewed our calls against the year’s outcomes and awarded us a highly dubious 75% accurate.

On the right side of the ledger: broadly positive though more muted performance; overall declines in fundraising; and the relative resilience of geographies and sectors insulated from global supply chains. Our suggestion that the middle market would prove more attractive than mega-cap buyouts, and that manager dispersion would increase meaningfully, also held up well.

“The snapback from the “late frost” of tariff volatility in early 2025 was faster than we anticipated, leaving us too pessimistic on deal making, too optimistic on spread widening in direct lending, and expecting a more favourable environment for distressed debt than 2025 delivered.”

Where we fell short was primarily underestimating the market’s resilience. As we noted in last year’s report “Spring’s Promise, Broken by a Late Frost,” the tariff-driven volatility of early 2025 led us to anticipate a more prolonged period of market disruption. The snapback from the “late frost” of tariff volatility in early 2025 was faster than we anticipated, leaving us too pessimistic on deal making, too optimistic on spread widening in direct lending, and expecting a more favourable environment for distressed debt than 2025 delivered.

Highlight: The recovery is real but unglamorous

Rolling returns, though slightly down from a year ago, were positive across core asset classes. No blow-out numbers, but consistent positive performance across a diverse set of strategies. The catch is that headline returns mask dispersion, and the illiquidity premium is increasingly earned (or lost) through manager selection.

Highlight: Dealmaking is back; distributions are not

To Manager Selection’s surprise, global buyout M&A exceeded USD 900bn in 2025, nearing the USD 975bn all-time high set in 2021. The headline was supported by a smaller number of very large transactions, but sentiment has improved. Distributions, however, have not. Until exits reopen meaningfully, secondaries will provide a release valve.

Highlight: Infrastructure, the 2025 standout

In a year when fundraising was a grind for most managers, infrastructure shined. The asset class raised nearly USD 200bn, a record, as the stable performance and consistent distributions of recent years continued to attract capital. The asset class benefited from a structural tailwind that shows no sign of reversing: the intersection of AI-driven data centre demand, energy transition investment, and constrained public sector balance sheets. Yet periods of heavy fundraising can dilute forward returns by intensifying competition and pushing entry pricing higher.

Highlight: Democratisation of private markets is tested

The expansion of private markets into wealth, retail, and insurance channels continued in 2025, with US evergreen AUM reaching USD 500bn, double 2022 levels. Growth in Business Development Companies or BDCs (a US-specific structure widely used by retail investors due to favourable tax treatment) is particularly notable. The segment has faced several negative headlines in early 2026. Overall we expect evergreen structures to continue to grow, but 2026 will likely produce both winners and losers in the BDC space, along with useful lessons for the broader semi-liquid market.

Highlight: AI everywhere

AI has moved from a discrete theme to a driver embedded across public and private markets, reshaping what gets funded, what gets built, and how risk is priced. In venture, it is the dominant deal driver and a major source of mark-ups.

“AI has moved from a discrete theme to a driver embedded across public and private markets, reshaping what gets funded, what gets built, and how risk is priced.” 

In real estate and infrastructure, AI translated into demand for data centres, power, grid connectivity, and fibre. In public credit, it is changing the nature of the investment grade indices as hyperscalers issue bonds. In private credit, AI places a spotlight on industry concentration in an era of structural change. The takeaway for allocators is uncomfortable but clear: AI exposure is everywhere.

2026 outlook

Should the war in Iran and the subsequent oil price shock resolve swiftly, the impact on private markets is likely to be contained. If not, higher energy prices will almost certainly lead to higher inflation, and higher rate expectations. This would have negative performance implications for most asset classes in this report, as well as result in slower exits and lower distributions, with knock-on effects for fundraising.

“Should the war in Iran and the subsequent oil price shock resolve swiftly, the impact on private markets is likely to be contained.” 

Overall, we have tried to learn from last year’s errors and prioritise slower-moving data over fast-moving headlines, but once again the range of outcomes remains wide. We continue to favour the middle market over large-cap private equity and to prioritise regions that are relatively insulated from global volatility. In direct lending, we see scope for spreads to widen modestly if negative headlines weigh on fundraising, particularly in the US where spreads are tighter.

Our base case is top-level fundraising stabilises around 2025 levels, consistent with a trough, unless distributions pick up in earnest. That, in turn, depends on dealmaking, which began strongly but now appears to be slowing due to ongoing geopolitical uncertainty (similar to last year). Semi-liquid vehicles should remain in focus and may emerge stronger once the 2026 issues in BDCs help right-size parts of the market. Manager dispersion, meanwhile, is likely to remain high.

We hold these views with conviction, but not with certainty and reserve the right to be wrong. Ideally by no more than 25%.

This article is an excerpt from SEB Manager Selection’s Private Markets Report. The full report is available for download as a PDF here.