In a market that continues to be defined by uncertainty, Nils Rode, chief investment officer at Schroders Capital, the specialist private markets arm of UK-listed Schroders, discusses where opportunities lie for wealth investors in the third quarter of 2025 for private markets. 

Uncertainty remains the dominant theme for the global economy, in the face of multiple geopolitical and policy headwinds. The potential of investing in private markets to help navigate this prevailing global uncertainty has arguably never been more important, according to Nils Rode, chief investment officer at Schroders Capital.

“Importantly, private markets continue to benefit from cyclical tailwinds. A broader slowdown in terms of fundraising, new deal activity and exits in private equity, infrastructure and real estate is now into its fourth year – and supply of capital in financing markets continues to be constrained,” Rode said in a note.

As a result, private market valuations and yields are generally attractive in both absolute and relative terms – and there are specific opportunities across private asset classes to boost portfolio diversification, resilience and returns. At the same time, in a market with heightened idiosyncratic risk, diversification across private market strategies remains key.

Rode outlined five key takeaways for wealth managers and private investors for the third quarter of 2025, highlighting the role private markets can play in asset allocation.

1. Selectivity and downside protection hold the key
Private markets, which have historically offered some protection against public market volatility, have often thrived amid environments of uncertainty.

However, Rode believes that in the current market environment there will be some private market strategies that exhibit notably better risk/return profiles than others.

He thinks that investors should continue to be selective and focus on strategies with downside protection in the form of modest leverage or asset backing, that provide access to companies and assets that are to a degree insulated from global trade tensions, and that can bring diversification through reduced correlation with listed markets and distinct risk exposures.

2. In private equity, three main themes are emerging
Within private equity, Rode has identified three complementary levers that he believes can help to mitigate hurdles in the current investment landscape

Local champions: Backing companies with domestic and service-orientated revenues, limiting exposure to tariff, supply-chain and geopolitical uncertainties. This can be achieved through concentrating on small and mid-market buyouts.

Transformative growth: Investing in businesses where operational complexity or innovation agendas create controllable value-creation paths and extra return premia, offsetting broader market turbulence. Again, small and mid-buyouts are key opportunities – and continuation investments, also known as GP-led secondaries, also provide a compelling and cost-effective way of accessing the next growth phase for high-quality, private equity-backed companies, without disrupting value creation plans.

Multi-polar innovation: Allocating to the widening set of regional technology hubs so that portfolios capture breakthrough growth wherever it emerges, diversifying away from single-market concentration risk. This targets early-stage venture concentrated in key sector opportunities.

3. In private credit, specialised strategies offer attractive yields
In this environment, Rode feels that pockets of volatility, such as the more attractive yields on offer following US trade tariff announcements, are producing interesting opportunities across the debt spectrum for income-seeking investors.

The more intense the volatility, and the more disrupted the liquidity is in regulated channels, such as banks and insurers, the more opportunities can be seen in private credit in particular.

Specifically, Rode sees an urgent need emerging to refinance construction and maturing commercial real estate loans in the US, as transaction activity has increased at the same time as issuance has slowed on syndicated markets. Meanwhile, specialty and asset-backed finance offer inherent diversification and access to differentiated risk premiums, with the potential for capturing market inefficiencies created by turbulence.

“For those hunting for diverse and stable income, the solid, “boring as usual” and comparatively high income available from infrastructure debt looks particularly appealing in today’s uncertain environment,” Rode said. “Insurance-linked securities also continue to stand out for their lack of correlation with the macroeconomy, providing a much-needed respite from unstable markets.”

4. Focus on Europe and Asia for energy transition infrastructure
Rode believes that the energy transition segment in infrastructure in the current uncertain macro environment remains particularly compelling, due to its strong inflation correlation and secure income traits. It also provides positive diversification through exposure to distinct risk premia, such as energy prices.

He sees the most attractive opportunities in Asia and Europe, where governments are strengthening their decarbonisation commitments. In the US, it also appears that the federal tax credit support for renewables will be phased out on a much more rapid timeline, which could initiate a rush of activity to install new plant.

The market has shifted to a buyer’s market since 2024, recalibrating expected equity returns due to higher interest rates and reduced dry powder, creating a capital supply and demand gap. “The current environment remains attractive for core/core+ strategies,” he added.

5. We still expect 2025 to be a strong vintage for real estate
Rode thinks that there is now increasing evidence of positive real estate market movements – his proprietary valuation framework points to investment opportunities across multiple sectors and geographies.

With performance expected to improve sequentially across markets, Rode believes that 2025 will be a strong vintage year for deployment, despite the impact of tariffs and other uncertainties. However, he recognises the stagflationary risks that could manifest.

Although the economic outlook for his rental growth projections was already muted, and is now further obscured by market uncertainties, operating conditions remain supported by broadly constrained supply. Elevated construction costs have been a major factor in this – and additional rises in construction costs could contribute to a 'cost-push' effect on rents, a dynamic he has already observed emerging.

“Both transaction pricing and valuations have shown modest improvements in the first quarter of this year following recoveries across regions and segments, albeit the extent of these varies considerably across markets,” Rode concluded.

Other investment managers share  Rode's vews. Despite the increasing difficulties presented by volatile markets and geopolitical tensions, a survey by Blackstone, a New York-based alternative asset manager with $1 trillion in assets under management, shows that advisors are increasing allocations to private markets in client portfolios. While traditional private equity might be slowing and continuing along that path, 68 per cent of advisors said they plan to raise private market allocations. See here.