Optimism for Growth: Private Markets in 2026

As we step into 2026, Europe’s private capital markets are entering a new phase, one defined by cautious optimism, operational discipline, and structural evolution. Following a period of macroeconomic turbulence and liquidity constraints, the industry is now recalibrating for growth. Here, Nick McHardy, our head of funds, shares the key trends set to shape the European private capital landscape in 2026.

1. Deal activity rebounds as rates ease

After a prolonged period of elevated interest rates and geopolitical uncertainty, the macroeconomic backdrop is finally turning more supportive. Rate cuts by the European Central Bank and the Bank of England in late 2025 have begun to ease financing costs, reigniting deal activity across the region. In Q3 2025 alone, European private equity deal value surged by 25% quarter-on-quarter, with megadeals and cross-border M&A returning to the fore[1].

The IPO window, long shuttered, is cautiously reopening. High-profile listings have restored confidence in public market exits, particularly for profitable, well-governed businesses[2]. Meanwhile, M&A volumes are on track to surpass 2021’s record highs, driven by strategic buyers and sponsor-backed transactions alike[3].

2. Fundraising: flight to quality and creative liquidity

Fundraising remains a tale of two markets. Top-tier managers continue to attract capital, while mid-sized and emerging GPs face extended timelines and heightened scrutiny. Institutional LPs, still recovering from a four-year distribution drought, are increasingly selective, prioritising track record, transparency, and alignment[4].

To bridge the liquidity gap, continuation funds and secondaries have become mainstream. GP-led transactions are on track to exceed $100 billion in 2025, with one in six buyout exits now occurring via a GP-led process[5]. Cambridge Associates estimates that continuation vehicles will represent at least 20% of all private equity distributions in 2026[6]. These structures offer LPs optionality and allow GPs to retain high-performing assets while maintaining AUM stability.

At the same time, the rise of evergreen and interval fund structures is opening private markets to high-net-worth individuals and family offices. Preqin estimates the global evergreen fund market now exceeds $350 billion, with over 520 vehicles – double the number from five years ago[7]. These structures are increasingly popular for their simplified access, periodic liquidity, and alignment with the needs of the less institutional investor.

3. Private credit maturity

Private credit continues its ascent as a core component of the European capital stack. With banks retrenching and syndicated markets still volatile, direct lenders are stepping in to finance buyouts, refinancings, and sponsor-less deals. The asset class is maturing rapidly, with increased regulatory attention and a shift towards more transparent, institutional-grade practices[8].

However, competition is intensifying. Pricing has tightened, particularly in the mid-market, with spreads compressing amid a dearth of high-quality deal flow[9]. Managers must remain nimble, focusing on credit selection, sector specialisation, and value-added structuring to maintain returns.

4. Operational excellence as a differentiator

In a world of compressed multiples and cautious capital, operational value creation has become the new alpha. GPs are expanding their operating partner benches, investing in data infrastructure, and embedding digital transformation into portfolio company strategies. AI-driven analytics, real-time monitoring, and scenario modelling are now standard tools in the value creation toolkit[10].

This shift is not limited to private equity. Venture capital firms are leveraging AI for deal sourcing and due diligence, while private credit managers are enhancing borrower monitoring and risk assessment capabilities. The firms that institutionalise these capabilities will stand out in an increasingly competitive fundraising environment.

5. ESG and Regulation: Embedded and positioned for growth

Environmental, Social, and Governance (ESG) considerations are now widely integrated to the investment decision-making process. Regulatory frameworks such as the EU’s Sustainable Finance Disclosure Regulation (SFDR) and the UK’s Sustainability Disclosure Requirements (SDR) are driving standardisation and transparency. Funds classified as Article 8 or 9 under SFDR continue to see strong demand.

Regulatory divergence between the UK and EU is creating complexity for cross-border managers, particularly around fund marketing, reporting, and governance however it could support growth of UK structures as a growth agenda is pursued. Meanwhile, private credit is under growing scrutiny, with the Bank of England launching its first stress test of the sector in 2025[11].

Looking ahead

2026 marks a turning point for private capital. As interest rates ease and exit routes reopen, the industry is shifting from resilience to reinvention. Fund managers are embracing new structures, expanding investor access, and embedding technology across the investment lifecycle. LPs, in turn, are demanding greater transparency, optionality, and operational excellence.

In this evolving landscape, the role of fund administrators is more critical than ever. At Belasko, we’re proud to be redefining what exceptional looks like in private capital fund administration. As a fast-growing provider, we combine deep technical expertise with agile delivery and a strong commitment to client service. Whether supporting first-time managers or complex cross-border structures, we deliver tailored solutions that scale with ambition.

In a market where trust, transparency and technology are paramount, Belasko is helping clients stay ahead, by making excellence the standard. Get in touch if you’d like to discuss further.

[1] HarbourVest, 2026 Market Outlook

[2] PitchBook, 2026 EMEA Private Capital Outlook

[3] Wellington Management, Venture Capital Outlook for 2026

[4] Preqin, Global Report 2026: Key Trends (Dec 2025)

[5] Coller Capital, Market Outlook 2026 (Dec 2025)

[6] Cambridge Associates, 2026 Outlook: PE/VC Views (Dec 2025)

[7] Cambridge Associates, 2026 Outlook: PE/VC Views (Dec 2025)

[8] Preqin, Global Report 2026: Private Credit Trends

[9] Ropes & Gray, Secondaries Quarterly Update Q3 2025

[10] Cambridge Associates, 2026 Outlook: Operational Trends

[11] Bank of England, Private Credit Stress Test (2025)