2025 might very well have been Alice’s backward world of inverted logic and nonsensical happenings. Through the same looking (hazy) glass, investors are bracing themselves to play more multi-dimensional chess in 2026, in a world turned upside down. From our conversations with a broad cross-section of institutional investors globally, we tabulate succinctly what LPs expect of the unfolding investment climate and what are some measures/portfolio actions they are considering, especially in private markets. So, for small/emerging managers who have faced an uphill battle garnering LP attention, it is important to recognize LPs’ investment concerns and their new line of thinking.

What are LPs EXPECTING of Investing Landscape/Private Markets?	In Response, What are LPs CONSIDERING?
Higher inflation and interest rates (and subdued PE led M&A/exits)	Inflation-linked income streams in Real Asset credit (digital/energy infrastructure and industrial/senior living real estate)
Overleverage (as leverage shifts from banks-pre GFC- to governments and now corporates)	Balance sheet restructuring of good businesses/bad balance sheets i.e. capital solutions in regimes with well-defined bankruptcy laws to enforce collateral
a)    Higher market volatility b)    Stretched valuations, spread compression and lower expected returns c)     Growing concerns around systemic risks posed by US private credit	Stable, tangible/contractual “income” in global non-sponsored corporate lending, asset-based lending, collateralized “stable cash flow” asset pools where spreads are not competed away AND not intertwined with banks (e.g. NAV lending, forward flow agreements, influx of private wealth etc.) and insurance companies
Higher inter/intra asset correlations (also attributable to pervasive influence of AI) in a deglobalized world order	-Differentiated LOCAL opportunities across geographies, sectors, themes adopting a Total Portfolio Approach (vs. old school Strategic Asset Allocation) based on opportunity drivers (not necessarily economic drivers) -Uncorrelated strategies e.g. pharma royalties, ILS etc.
Increased capex in climate mitigation/adaptation/energy transition	Energy infrastructure build out: debt and equity
Reconfigured global supply chains	Monetizing intra-Asia trade and increased business activity to strengthen regional connectivity
Big managers face more capital glut-too much money (from insurance, pvt. wealth channels) chasing too few opportunities in US/Europe AND performance issues (higher interest rates, talent flight, rising defaults etc.)	Rich pedigreed smaller managers with boots on the ground in Southeast Asia, given breadth and sophistication of region and deep talent pool
Increased litigation with rising trade/territorial conflicts, broken/ad hoc rules, societal divisions, multiple stakeholders, win-lose situations, loose covenants, valuation discrepancies etc.	Transaction due diligence through a litigation lens; preference for managers with network of lawyers/in-house transaction lawyers or principals with legal expertise & experience
Increasing role of government	Understand local politics and related government policy surrounding transactions
Consolidation of private credit managers	Closer attention to “change of control” clause in the LPA
Continued illiquidity among private market managers	Secondary markets with an eye toward valuations and competition from evergreen funds

 

If you are a small/emerging manager and you think your strategy could potentially be part of LPs’ solution set for a new investing paradigm, then it begs the next question: Are you ready to be discovered by LPs and prepared for their consideration? To assess your readiness, we share a short list of some key LP questions/concerns that GPs could expect from LPs.

Small/Emerging GPs: What to EXPECT from LPs?

Ø  Skepticism of GP’s business strategy: asset gatherer vs. capital steward

Ø  Skepticism of deal origination capabilities and timely exits

Ø  Skepticism of manager’s ability to deal with all-round uncertainty -what’s the worst-case scenario

Ø  Skepticism of operational stability

Ø  Bucketing dilemma: where does GP strategy fit in portfolio given blurring of strategy definitions

Ø  Continuing bias toward large/brand name alternatives GPs

Ø  Overwhelmed with GP pitches- why should I entertain yet another GP who I have never heard of or seen/known

Ø  Demand for greater transparency especially around: -Valuation -Default/loss/recovery history -Fund expenses -Keyman clause -GP commitment

Ø  Greater demands on risk management-as a small shop how have you addressed all necessary functions and built institutional best-practices

Ø  How do you build process efficiency by leveraging new technology e.g. AI (internally) without delegating/substituting investment decision-making?

 

If you’d like to compare notes on how prepared you are/your responses and discover any areas of improvement, please free to reach out to ÊMA for a no obligation conversation.  ÊMA remains committed to empowering smaller managers solve for LPs.

Here’s wishing you and yours our very best for a “normal” and peaceful 2026.

Yours Truly,

Kamal Suppal

Chief Investment Auditor

December 9, 2025

The above content is intended for sophisticated audiences as in institutional investors or family offices. Readers are advised that any theme or idea discussed above is not an offer to buy or sell any investment.