The macroeconomic environment continues to weigh on investment activity, a situation further exacerbated by persistent geopolitical tensions. Despite this, most listed European alternative managers recorded a year-on-year increase in investments during the twelve months ending March 2026. Fundraising was more arduous than usual but remained robust. Furthermore, European managers are increasingly seeking to broaden their investor base, distribution channels, and the range of strategies on offer.

Fitch views 'favorably the scale gained by sector participants as well as their business diversification efforts'. However, it is crucial for these firms to manage the resulting operational and reputational risks. Semi-liquid structures aimed at retail investors are under particular scrutiny due to the potential pressure they could exert during periods of market stress. A surge in risk aversion could indeed trigger significant redemptions. Retail investor participation in private assets remains limited in Europe, and the sector has not experienced meaningful net withdrawals.

Nevertheless, the expected growth of this distribution channel will create new challenges in terms of liquidity management.

The rise of private markets in Europe is also accompanied by heightened regulatory oversight, particularly regarding market interconnectedness, valuation methodologies, and governance. Private asset valuations remain inherently subjective and often tend to lag behind public markets. Moreover, subdued activity reduces the number of market benchmarks available to establish these valuations.

Fitch expects market participants to monitor valuation methods with increasing scrutiny, in a context where the macroeconomic environment and disruptions related to artificial intelligence could significantly test investment performance.

Notable M&A transactions recently announced include EQT's acquisition of secondary market specialist Coller Capital, CVC's takeover of credit manager Marathon Asset Management, and the strategic partnership formed between ICG and Amundi. Fitch expects sector consolidation to gain momentum as competition intensifies.