Private market portfolios to benefit from low entry points

FinCap, a private markets investment platform, says some market conditions that produced the strongest private fund vintages of the past 25 years have returned, and recommends that investors build allocations gradually across 2027 and 2028 rather than wait for sentiment to recover. Ben Davis, head of portfolio and investment solutions at FinCap, said the firm's research points to diversifying across private equity, real estate, infrastructure and credit, with a tilt toward mid-sized companies, discounted secondary stakes and limited exposure to segments where capital is most crowded.

FinCap cites PitchBook data showing 551 US private equity funds closed in 2025, down from 836 in 2021. First-time funds fell to 23 in the first half of 2026, compared with an average of about 180 a year between 2021 and 2023. Buyout funds have returned less than 15 per cent of net asset value to investors in each of the past four years. Davis argued that exits are slow and sellers needing cash are accepting lower prices. Historical vintage data show real estate funds that began investing at the 2005 to 2007 peak lost about 3 per cent a year, while those that started after the global financial crisis returned about 19 per cent a year. Davis said such returns are not expected to repeat, and framed the strategy as steady investment over three years so each year's capital buys at that year's prices.

By segment, FinCap is overweight private equity, with the largest overweight in the mid-market. It cites smaller US companies sold for an average of 7.0 times earnings in the June quarter, compared with 12.5 times for the typical US buyout in 2025. It is also overweight real estate, tilted toward value-add strategies; FinCap said US commercial property is 12.8 per cent below its 2022 peak and office is a third below. Citing Jefferies' Global Secondary Market Review, it noted sellers of real estate fund stakes received 68 per cent of NAV in the first half of 2026, the lowest of any private asset class. In infrastructure, Davis said the firm is selective, noting the International Energy Agency expects data centre electricity use to roughly double by 2030, but that capital crowding into value-add infrastructure narrows opportunities. In private credit, FinCap favours opportunistic strategies over direct lending, citing Australian listed credit trusts trading at discounts of 10 to about 25 per cent to NAV in 2026 and the main US business development company index yielding 10.8 per cent at the end of September. FinCap is underweight venture capital due to high late-stage valuations, gaining exposure through secondaries and co-investment.

FinCap identified three risks for 2027: a sharper interest rate cycle driven by rising inflation expectations, a recession that cuts earnings before entry prices adjust, and exit markets remaining closed longer, which could extend the wait for distributions. Davis also cited Bain & Company's estimate that a buyout now needs 10 to 12 per cent annual earnings growth to return 2.5 times over five years, up from about 5 per cent, arguing active management will matter. FinCap's Helm Growth portfolio holds 53 per cent in private equity, 15 per cent in infrastructure, 14 per cent in real estate and 8 per cent in venture capital. Helm Income holds about 16 per cent in flexible and opportunistic credit, 10 per cent in real estate and 9 per cent in infrastructure. BCA Research advises on asset allocation, while positions and manager selection are based on FinCap's own research.