Franklin Templeton maps out 2026 private markets plays for advisers

Global markets are limping toward the end of 2025 in a strangely familiar mood: US equity indices at or near new highs, the Federal Reserve edging back into a rate-cutting cycle and inflation that refuses to quite return to target. Add in ongoing trade tensions and geopolitical flashpoints, and it’s no surprise that many advisers are questioning how much longer the “public beta trade” can do the heavy lifting in client portfolios. For Franklin Templeton, the answer lies increasingly off-market.

“We see attractive opportunities within private markets in the year ahead. There will be some areas that face considerable headwinds, while others will benefit from structural changes underway,” says Tony Davidow, senior alternatives investment strategist at the Franklin Templeton Institute. “Our highest-conviction ideas are private equity secondaries, commercial real estate debt, real estate and infrastructure. In our view, manager selection will be critical in distinguishing among the winners and losers, where we anticipate a larger dispersion of returns. We also believe there will be a big difference in deploying capital today versus older vintages.”

For advisers, that’s really a conversation about which private markets, what structure, and how to incorporate them sensibly into client portfolios.

Private equity: Secondaries as a cleaner way to play the cycle

Franklin Templeton’s first call is that, within private equity, the more interesting opportunity in 2026 is not ‘blind-pool’ primary funds but secondaries.

“While exits have picked up, and valuations are down, we still favour secondaries due to attractive fundamentals and their built-in structural advantages. Institutions and family offices still need liquidity to meet their needs. From an investor perspective, secondaries have several built-in structural advantages that are particularly important in today’s market environment, including shortening the J-curve and returning capital to investors quicker, and diversify holdings across vintage, general partner (GP), geography, industry and stage (venture capital, growth and buyout),” says Davidow.

For advisers, that speaks directly to two perennial client pain points with private equity: the long wait for distributions and the concentration risk in any one vintage or manager. Secondaries can allow:

• Buying into existing portfolios at today’s valuations, rather than committing to yesterday’s
• Faster return of capital, which matters for retirees and near-retirees
• Diversification across managers, geographies and deal stages in a single allocation

The market itself has transformed in the last decade. Franklin Templeton notes that since 2015, secondary transaction volume has grown fivefold, with GP-led (that is, instigated by the fund manager) deals rising from 18 per cent of activity in 2015 to an anticipated 45 per cent in 2025. LP-led (that is, instigated by investors) transactions give institutions a way to meet liquidity needs; GP-led deals, often via continuation vehicles, are increasingly used by fund managers to hold on to their “crown jewel” assets.

“Single-asset continuation vehicles (SCVs) have emerged as an attractive exit option. With the initial public offering market experiencing ongoing weakness and traditional exit routes remaining subdued, these vehicles enable sponsors to provide liquidity to existing investors while maintaining exposure to high-conviction assets,” notes Davidow.

For advisers, the practical implication is that secondaries are no longer a niche side-show; they are becoming a mainstream way to access seasoned assets at potentially more attractive entry points, while still giving clients exposure to private equity’s growth engine.

Private credit: Looking past crowded direct lending

If 2024 was the year everyone discovered direct lending, 2025 has shown what happens when too much capital crowds into the same trade.

“In 2024, nearly 60 per cent of global flows were allocated to direct lending; however, in 2025 deal flow (comprising 38 per cent of capital raised) slowed dramatically. Consequently, direct lending spreads have compressed, and there are growing concerns about future performance. While direct lending seemed to be late-cycle, we find more attractive opportunities with asset-based finance (ABF) and commercial real estate (CRE) debt, which have their own unique risk, return and correlation characteristics,” says Davidow.

“Our favourite investment in private credit is CRE debt due in large part to the ‘wall of debt’ that will need to refinance in the next several years. After the collapse of Silicon Valley Bank in 2023, regional banks have been reluctant to lend capital, which has left a void in the marketplace. The real estate market has significant refinancing needs, with an estimated US$2.6 trillion ($3.9 trillion) in real estate debt expected to require refinancing between 2026 and 2029.”

Multi-family and office hold the largest outstanding debt stocks, with offices under the most obvious stress and likely valuation declines. That is uncomfortable for equity investors, but potentially very attractive for lenders coming in at more conservative loan-to-value ratios and higher spreads.

“This environment creates opportunities for lenders of capital. With more realistic valuations, lenders may be presented with more attractive returns,” Davidow says.

For advisers, this is where structure and manager capability really matter: understanding where in the capital stack the strategy sits, what level of protection sits beneath the debt, and how diversified the underlying loan book is by sector and geography.

Real estate: Beyond the office gloom

The headline story on real estate has been office vacancies and falling valuations; Franklin Templeton’s view is more nuanced.

“Real estate valuations are down substantially from their 2021 peak, due to various headwinds and concerns about the office sector. In fact, many properties are now available below their replacement costs,” says Davidow. “We continue to have concerns about the office sector, but believe that multi-family, industrials and other sectors can provide attractive opportunities. We think there will be a few themes that will play out in the next several years, namely, demographics, innovations, housing, shifting globalisation and resiliency. The macro themes create opportunities across the real estate market.”

Franklin Templeton highlights four real-asset stories advisers may want on the radar:

Multi-family housing
“Multi-family: This sector sits at the centre of the demographic change and need for housing. Millennials and Gen-Z have unique needs and tastes for housing. As baby boomers retire and downsize, this is driving demand for age-targeted housing. Historically low housing affordability, driven in part by high mortgage rates but structurally by low supply, is increasing demand for the rental market.”

Industrial warehouses
“Industrial warehouse: The strong demand and performance of this sector is likely to continue, in our view. Steady consumption growth, buoyed by the higher earnings of the digitally native Millennial and Gen-Z cohorts, should drive e-commerce and thus warehouse demand. This sector should also benefit from the shifting trade patterns that have led to reshoring and onshoring of manufacturing.”

Senior housing, medical office and life sciences
“Senior housing and medical office: Ageing demographics and the resultant need for specialised care will drive growth and demand in senior housing facilities across independent and assisted living, as well as medical office buildings and specialty outpatient health care facilities. The same trend, coupled with technological innovation, will, over the long run, drive the life sciences sector, which includes biotechnology, pharmaceuticals, medical devices and genome research, among other areas.”

Necessity retail
“Necessity retail: As Millennials and Gen-Z enter their prime earning and spending years, necessity retail properties will likely benefit, alongside e-commerce. This will be positive for grocery stores and necessity formats. Technological advancements in ‘omnichannel’ retail are driving demand near consumers, and we expect this trend to continue.”

Infrastructure: The real assets behind AI, energy transition and reshoring

Franklin Templeton also sees a powerful multi-year opportunity in infrastructure.

“We believe infrastructure represents an emerging opportunity, and see the most attractive opportunities in digital infrastructure, decarbonisation, deglobalisation and demographics. Digital infrastructure includes data centres, fiber optics and cell towers. Decarbonisation and energy transformation reflects the growing emphasis on climate change and the need to respond and rebuild. Deglobalisation is a trend reflecting the need to reshore our supply chains and logistics; demographics is the need to respond to population growth in certain regions, and ageing demographics in others,” says the firm.

According to PitchBook, “assets under management (AUM) in global real assets are forecast to grow 5.4 per cent annually, reaching US$2.4 trillion by 2029, with about 75 per cent in infrastructure. Advances in artificial intelligence, the energy transition and shifting global trade are driving increased demand for real assets and boosting investor confidence.”

And the capital need is far from theoretical:

“Globally, regions are intensifying investment in infrastructure to address economic growth, climate imperatives and technological change. Digital infrastructure requires robust local and global communication systems spanning wireless, wired fiber (sic) and data centers. As internet and data demand escalates, we expect the need for investment across these subsectors to increase substantially,” says Franklin Templeton.

For advisers, infrastructure can tick several boxes at once: long-duration contracted cash flows, partial inflation linkage and exposure to structural trends that sit beyond the usual equity style rotations.

What this all means for advisers

The common threads across Franklin Templeton’s 2026 outlook are clear:

• Stay selective within private markets, the dispersion of returns is likely to widen.
• Favour parts of the opportunity set where forced sellers and structural funding gaps exist (secondaries, CRE debt, certain real estate subsectors).
• Look to real assets and infrastructure as potential portfolio ballast in a world of sticky inflation and heavy capex needs.

For advisers, the challenge is to translate these big themes into actual portfolio decisions, appropriate sizing, liquidity terms clients can live with, and manager due diligence that genuinely tests strategy, track record and risk controls.

James Dunn

James is an experienced senior journalist and editor of The Inside Network's publications.