Key Takeaways
- • LP selectivity intensifying across private capital: Nearly two-thirds of institutional investors (62%) expect return dispersion among private credit managers to widen significantly over the next one to two years, signaling a clear shift toward backing only top-performing fund managers.
- • Private credit allocation surge with performance expectations: 42% of LPs plan to increase target allocations to private debt and credit over the next 12 months—the strongest growth among alternative asset classes—yet investors are simultaneously demanding greater manager selectivity and stricter due diligence.
- • GP-led secondaries gaining acceptance with growth projections: 85% of LPs expect continued growth in GP-led secondaries within private credit, with 65% anticipating selective expansion among certain managers, reflecting secondaries' increasing role as a liquidity and portfolio management tool.
- • IPO window reopening as de-risking catalyst: 77% of LPs report their GPs are preparing portfolio companies for public markets, with 77% of investors hearing IPO plans from at least some managers in 2026—a marked reversal from the subdued exit environment of recent years.
- • Co-investments and late-stage primaries preferred for visibility: LPs are actively favoring co-investments and late-stage primary fund commitments as mechanisms to strengthen manager selection and gain direct investment visibility, reducing reliance on blind-pool commitments.
Summary
Institutional investors are entering a phase of pronounced selectivity across private capital markets, fundamentally reshaping their allocation strategies and manager relationships. The 43rd edition of the Coller Capital Global Private Capital Barometer, a comprehensive survey of limited partners, reveals that while private markets remain central to institutional portfolios, LPs are now applying far more rigorous performance filters when committing capital to managers.
The most striking trend concerns private credit, which remains the strongest-growing segment in alternative allocations. However, the market dynamic has shifted materially from growth-at-all-costs to performance-based differentiation. Nearly two-thirds of institutional investors (62%) anticipate that return dispersion among private credit managers will widen significantly over the next one to two years. This expectation reflects LP concerns about manager quality, operational execution, and the sustainability of returns in an increasingly competitive market. Simultaneously, 42% of LPs plan to increase their target allocations to private debt and credit over the next 12 months, making clear that institutional appetite remains strong—but exclusively for managers demonstrating competitive edge and proven execution capabilities.
GP-led secondaries have emerged as a primary mechanism for this selective capital deployment. An overwhelming 85% of LPs expect continued growth in GP-led secondary transactions within private credit, with 65% specifically anticipating selective growth concentrated among certain managers. This reflects institutional investors' growing acceptance of continuation vehicles and manager-led secondaries as standard portfolio management tools, rather than distressed exit mechanisms. These structures allow LPs to maintain exposure to top performers while exiting underperforming or mature fund positions.
Exit activity is also accelerating as LPs observe renewed IPO momentum. According to the survey, 77% of LPs report that their GPs are actively preparing portfolio companies for public markets, with 32% of investors noting that multiple GPs have shared specific IPO plans for 2026, and a further 45% hearing similar indications from at least some managers. Only 9% of LPs report no IPO discussions—a dramatic shift from the subdued exit environment of prior years. This reopening of public markets may provide relief to managers facing dry powder pressure and portfolio company maturation timelines.
To strengthen their manager selection processes and reduce blind-pool risk, LPs are increasingly favoring co-investments and late-stage primary commitments. These structures provide direct visibility into investment quality and manager execution before committing larger amounts of capital to follow-on funds. This preference underscores the institutional shift toward relationships based on demonstrated performance rather than historical brand reputation or track record alone. As alternative asset allocations continue to expand globally, the clear market signal is that capital will flow to managers who can deliver consistent, top-quartile returns in an environment where dispersion is widening and selectivity is paramount.
The most striking trend concerns private credit, which remains the strongest-growing segment in alternative allocations. However, the market dynamic has shifted materially from growth-at-all-costs to performance-based differentiation. Nearly two-thirds of institutional investors (62%) anticipate that return dispersion among private credit managers will widen significantly over the next one to two years. This expectation reflects LP concerns about manager quality, operational execution, and the sustainability of returns in an increasingly competitive market. Simultaneously, 42% of LPs plan to increase their target allocations to private debt and credit over the next 12 months, making clear that institutional appetite remains strong—but exclusively for managers demonstrating competitive edge and proven execution capabilities.
GP-led secondaries have emerged as a primary mechanism for this selective capital deployment. An overwhelming 85% of LPs expect continued growth in GP-led secondary transactions within private credit, with 65% specifically anticipating selective growth concentrated among certain managers. This reflects institutional investors' growing acceptance of continuation vehicles and manager-led secondaries as standard portfolio management tools, rather than distressed exit mechanisms. These structures allow LPs to maintain exposure to top performers while exiting underperforming or mature fund positions.
Exit activity is also accelerating as LPs observe renewed IPO momentum. According to the survey, 77% of LPs report that their GPs are actively preparing portfolio companies for public markets, with 32% of investors noting that multiple GPs have shared specific IPO plans for 2026, and a further 45% hearing similar indications from at least some managers. Only 9% of LPs report no IPO discussions—a dramatic shift from the subdued exit environment of prior years. This reopening of public markets may provide relief to managers facing dry powder pressure and portfolio company maturation timelines.
To strengthen their manager selection processes and reduce blind-pool risk, LPs are increasingly favoring co-investments and late-stage primary commitments. These structures provide direct visibility into investment quality and manager execution before committing larger amounts of capital to follow-on funds. This preference underscores the institutional shift toward relationships based on demonstrated performance rather than historical brand reputation or track record alone. As alternative asset allocations continue to expand globally, the clear market signal is that capital will flow to managers who can deliver consistent, top-quartile returns in an environment where dispersion is widening and selectivity is paramount.
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