2025 was a year of strong performance despite ongoing uncertainty; global equities climbed more than 20%, global fixed income significantly outperformed cash, and commodities saw their best returns since 2022. While our outlook for the economy and markets in 2026 remains positive, underlying tensions persist.
Equity market concentration has reached record levels alongside high valuations. Credit spreads are currently at their tightest point in years. Furthermore, fiscal activism and economic nationalism have revived concerns regarding inflation, increasing the likelihood of a positive correlation between stocks and bonds.
This suggests that the traditional diversification playbook is losing its reliability, and the standard 60/40 portfolio is less likely to offer the stability investors require to grow wealth across various market cycles. This is where alternative investments become vital. While many investors view alternatives as merely a tactical addition, we consider them a strategic necessity for building resilient portfolios.
We believe compelling opportunities in the alternatives space are focused on three primary investment themes:
The next phase of Artificial Intelligence (AI)
The quest for portfolio durability
The evolving liquidity of private markets
Here is how these themes are reshaping the alternatives opportunity set in 2026.
Theme 1: The next phase of AI: Power, Energy, AI applications
Over the last three years, corporations have dedicated significant capital expenditure toward developing the digital and physical infrastructure essential for AI progress. We anticipate that the next stage of AI will be defined by resolving energy and power bottlenecks while unlocking value through the real-world integration of various applications. We also observe that these innovations are primarily occurring within private markets.
Rapidly rising power demand, occurring alongside supply constraints, aging infrastructure, and multi-year transmission backlogs, is re-emerging as a hard limit on AI growth. These factors are straining electricity grids, undermining reliability, and driving up power prices.
In fact, the U.S. could face a power deficit as soon as 2029. Addressing this will require investment not only in generation, transmission, and distribution infrastructure but also in energy efficiency and systems that improve reliability while reducing peak-load stress, thereby broadening the opportunity set for investors. For instance, in the U.S., this is expected to support consistent demand for natural gas and oil, providing secular tailwinds at a time when fundamentals are improving and valuations remain attractive.
However, this is not exclusively a U.S. issue. On a global scale, AI-driven load growth, electrification, and aging grid infrastructure are converging to create similar capacity and reliability constraints, making investment in both grid efficiency and firm energy supply a worldwide imperative.
