Private Capital Firms Shift Focus as Competition Intensifies

Termgrid’s Private Capital Survey H2 26 shows fundraising remains difficult: only 38% are optimistic and 51% expect conditions to be broadly unchanged. Continuation vehicles are expected to drive the next liquidity wave (33%), alongside hybrid fund finance (20%) and NAV financing (19%), while 53% expect non-bank lenders to keep gaining share in fund finance (64% in Europe vs 43% in the Americas). Operational technology is a differentiator—workflow automation is the top priority for nearly 40%—but AI is still nascent in enterprise knowledge management (only 16%), with accuracy (32%), integration (25%), and data security (20%) cited as key barriers.

Analysis

This reads less like a sentiment indicator and more like a map of where economics are migrating inside private markets: from raw AUM scale toward fee-rich liquidity engineering and workflow control. That structurally favors large alt managers with captive financing arms and recurring service revenue, while commoditizing traditional balance-sheet lenders that compete on price rather than speed or structuring flexibility.

The near-term implication is that continuation vehicles and NAV financing can keep the ecosystem liquid even if exit markets stay soft, which delays visible pressure on marks and fundraising for another 1-2 quarters. But that also increases refinance/valuation risk over 6-18 months if spreads widen or realizations do not improve, because the market can only roll the same asset base for so long before leverage becomes the constraint.

The bigger contrarian read is that the consensus is probably overpaying for "AI" narratives and underappreciating boring integration budgets. If workflow automation is the real spend category, winners are incumbents with embedded operating systems and data plumbing; pure AI point solutions will struggle to show measurable ROI, and procurement cycles will likely be slow. The survey also hints at a regional split that matters for relative value: EMEA looks more constructive on private credit growth, while the Americas remain more rate/spread sensitive, so any bank share loss story should show up first in fund finance rather than broad corporate lending.

Key Decisions for Investors

• Long a basket of private capital managers with private credit/fund-finance exposure (BX, KKR, ARES, OWL) vs. KRE on a 6-12 month horizon; the pair benefits if non-bank lenders keep taking share and liquidity solutions remain fee-accretive. Falsify if bank fund-finance growth reaccelerates or if rate cuts compress private credit spreads faster than fee income expands.
• Buy SSNC on a pullback or express via a modest 6-12 month call spread; workflow automation, not AI hype, is where budgets are moving, and SSNC is one of the cleaner public proxies for embedded operating workflow in alternatives. Risk is that spending remains fragmented and adoption stays slower than surveys imply.
• Do not chase pure-play AI fintech beneficiaries here; wait for evidence that enterprise knowledge-management adoption moves materially above the current low-teens penetration before underwriting revenue acceleration. This is a watch item, not an immediate long.
• Monitor continuation-vehicle and NAV-finance issuance over the next 1-2 quarters as the key catalyst series; if volumes inflect higher while exit activity stays weak, expect further support for private-credit fee pools but rising leverage/reputational risk. If issuance rolls over, the liquidity-support thesis is probably peaking.