Private Capital Firms Shift Focus as Competition Intensifies

Termgrid’s Private Capital Survey H2 26 shows fundraising conditions remain difficult, with 51% expecting conditions to stay broadly unchanged and only 38% expressing optimism. Respondents project the next liquidity wave from continuation vehicles (+33%), followed by hybrid fund finance (+20%) and NAV financing (+19%), while 53% expect non-bank lenders to keep gaining share (64% in Europe vs 43% in the Americas). On the operations side, workflow automation is the top priority (nearly 40%), but AI remains underutilized—only 16% have embedded AI into enterprise knowledge management, with accuracy, integration, and data security cited as key barriers.

Analysis

The clearest market implication is that private capital is fragmenting into winners with “plumbing + distribution” and losers without it. Managers that can offer liquidity solutions, financing, and operational support should keep taking share from plain-vanilla sponsors, which argues for continued dispersion in fundraising quality over the next 6-18 months; the biggest beneficiaries are large alternative managers with secondary and private credit franchises, while smaller GPs face more fee pressure and weaker closing power.

The fund-finance shift matters more for banks than the survey tone suggests. If non-bank lenders keep gaining share, regional banks with opaque exposure to sponsor lending and subscription lines face a slow margin/fee leak, while private-credit platforms and BDCs can defend pricing because borrowers value certainty more than the lowest coupon. The first-order move may look incremental, but the second-order effect is a tighter moat for scaled alternative platforms and less balance-sheet relevance for traditional banks.

The AI takeaway is contrarian: this is not a capex boom, it is an ops-budget reallocation. Workflow automation and knowledge-management integration should benefit boring enterprise software and fund-services vendors more than pure AI names, and the fact that adoption is still shallow suggests execution risk, not immediate monetization. That also means the “liquidity solutions” theme is partly a symptom of weak exits: if IPO/M&A windows reopen, continuation-vehicle demand can cool quickly and remove a key support for secondary managers and private credit deployment.

Key Decisions for Investors

• Overweight BX, KKR, ARES, and OWL versus KRE over the next 1-3 months: the mix shift toward continuation vehicles, NAV financing, and non-bank fund finance should support fee-bearing assets and origination volumes while bank share erodes; stop if bank loan growth and sponsor-spread compression reaccelerate for 2 consecutive quarters.
• Long SSNC on a 3-6 month horizon as a proxy for workflow automation in private markets: the spend is about integration, reporting, and data security rather than flashy AI, which favors incumbents with embedded workflows; thesis weakens if management commentary shows delayed enterprise software budgets or no pickup in alternatives-related revenue.
• Pair trade: long private-credit/alternatives leaders (BX or ARES) vs short regional-bank exposure (KRE) for 1-3 months; the risk/reward is attractive because share gains in fund finance should be slow-moving, but the trade should be reduced if funding spreads tighten materially and banks regain appetite.
• Treat private markets liquidity names as a watchlist, not a chase: if continuation-vehicle volumes fail to translate into realized fee growth by the next two earnings cycles, the market will likely de-rate the “liquidity solutions” premium.