Schroders Capital believes persistent geopolitical tensions, market concentration and policy uncertainty will continue to shape the global investment landscape, reinforcing the importance of resilience, diversification and selective exposure to private markets.
In its latest private markets outlook, the global investment manager said while financial markets have recovered strongly following a reduction in hostilities involving Iran, uncertainty remains the defining feature of today’s investment environment. It noted that although the fragile truce has eased immediate concerns over wider regional conflict, risks to global energy supplies and economic stability remain.
Schroders said investor optimism has lifted global equity markets to new highs, largely driven by a small group of technology and artificial intelligence (AI)-related companies. However, it warned that elevated valuations and increasing market concentration present growing risks for investors.
According to Schroders’ Global Investor Insights Survey, 85% of institutional investors expect market volatility to increase over the coming year. The survey found that geopolitical conflicts, uncertainty surrounding US foreign policy and concerns over energy security remain the biggest risks, while diversification and downside protection have become the top priorities in portfolio construction.
The firm said private markets continue to benefit from structural advantages, including longer investment horizons, lower sensitivity to short-term market sentiment and access to specialised investment opportunities. Although fundraising remains subdued in several segments, Schroders believes this has created attractive entry opportunities for long-term investors.
Within private equity, Schroders favours small and mid-sized buyout strategies, citing more attractive valuations, lower leverage and stronger resilience compared with large buyout transactions. It also identified continuation funds and secondaries as increasingly important sources of liquidity and investment opportunities as exit activity gradually recovers.
For private credit, the firm advocates a selective approach, favouring asset-backed finance, real estate debt, infrastructure debt and insurance-linked securities over concentrated corporate lending strategies. It said these asset classes provide diversified income streams, stronger collateral protection and reduced sensitivity to economic cycles.
In infrastructure, Schroders expects operational assets with contracted revenues, renewable energy projects, grid flexibility and battery storage to benefit from ongoing energy transition initiatives and heightened energy security concerns. It added that rising power price volatility could create opportunities for well-positioned infrastructure investors.
The firm also sees improving prospects for global real estate following several years of valuation adjustments. It expects sectors such as logistics, residential housing and storage facilities to benefit from constrained new supply, higher replacement costs and improving rental fundamentals, while recapitalisation opportunities continue to emerge across the sector.
Looking ahead, Schroders said investors should adopt a deliberate approach to diversification across both public and private markets, focusing on complementary return drivers rather than simply increasing allocations.
It argued that well-diversified private market portfolios can enhance long-term resilience, but emphasised that successful outcomes depend on disciplined strategy selection, valuation discipline and active portfolio construction rather than broad exposure alone.
