Alternatives in 2026: Why Institutional Demand Remains Strong – and What Managers Need to Get Right

As we enter 2026, institutional interest in alternatives and private markets remains strong, and industry estimates suggest that allocations will keep rising and could account for 20-30% of institutional portfolios over time. This is not a short-term response to recent volatility, but the continuation of a structural shift that has been building for years.   

In a macro environment shaped by higher interest rates, volatility and geopolitical uncertainty, alternatives have become a core component of portfolio construction, valued for their stabilising characteristics as much as for return potential. Yet bringing a new alternative strategy to market – or scaling an existing one – requires more than favourable demand. Success depends on aligning investor priorities, regulation and operational execution.

Based on current market dynamics, there are five key considerations for managers expanding their alternatives offering.  

1. Investor priorities and evolving risk appetite

Institutional demand remains robust, but expectations are becoming more nuanced. Interest is broadening beyond traditional institutions to include family offices, private wealth platforms and, increasingly, retail investors. Across this spectrum, investors are more deliberate about how they access alternatives and the role these strategies play in portfolios.

Flexibility is a priority, with semi-liquid structures gaining traction as a way to balance access to private assets with liquidity needs. Inflation protection continues to drive interest in infrastructure and real assets, while investors increasingly focus on outcomes — prioritising transparency, risk management and consistent delivery over broad thematic narratives.

For managers, this means product design must be tightly aligned to investor needs. Understanding preferences for target funds, fund-of-funds or bespoke mandates — and the level of complexity investors are willing to accept — is critical, particularly for those newer to alternatives. 

2. Regional dynamics shaping demand

Geography plays an increasingly important role. In the UK, the Long-Term Asset Fund (LTAF) regime is widening access to private markets for semi-professional and retail investors. In continental Europe, ELTIF 2.0 is gaining traction, particularly in private credit and infrastructure, enabling structures that appeal to a broader investor base.

Beyond Europe, Asia-Pacific continues to attract interest, with infrastructure and real asset projects often progressing more quickly, albeit with different regulatory and risk considerations. Managers need to assess not only where demand is strongest today, but where regulatory frameworks and investor behaviour are likely to support sustainable growth. For most institutional investors, asset quality and risk-adjusted returns remain paramount.  

3. Market timing and asset-class cycles

Investor appetite varies across sub-asset classes. Private credit continues to attract inflows as investors seek yield and diversification, while infrastructure and real assets benefit from long-term capital commitments. Private equity is navigating a more complex phase, with slower fundraising and constrained liquidity, yet remains structurally important within institutional portfolios.

As transaction activity and M&A recover, private equity and private credit are likely to regain momentum. Managers should be clear-eyed about where cycles sit, while recognising the long-term role these strategies play in diversified portfolios. 

4. Structural demand drivers

The most resilient alternative strategies are anchored in long-term structural trends. Ageing populations are driving sustained demand for healthcare and senior living. The energy transition and digitalisation are fuelling investment in renewables, transport and digital infrastructure. Portfolio diversification needs to continue to underpin growth in private credit.

Strategies aligned with these durable demand drivers are better positioned to attract long-term capital than those reliant on short-term dislocations or cyclical opportunities. 

5. Practical challenges to scaling

As alternatives scale, operational complexity rises. Managers must navigate fund structures such as ELTIFs, AIFs, RAIFs or Spezialfonds, alongside cross-border regulation, tax and reporting requirements. At the same time, investor expectations around transparency, data quality and governance continue to increase.

Institutional-grade infrastructure, robust reporting and effective risk monitoring are now competitive differentiators. Partnering with specialist service providers offering end-to-end solutions — from fund setup and administration to reporting and oversight — enables managers to focus on investment performance rather than operational burden. 

Conclusion

The growth of alternatives is one of the defining shifts in global asset management. But success requires more than launching a fund. It demands strategic timing, regulatory fluency, operational resilience and a deep understanding of investor needs. As the European alternatives market matures, managers that combine investment expertise with robust structures and scalable infrastructure will be best placed to capture the next phase of growth.