• How are you adjusting private markets fund design without undermining the illiquidity premium investors are seeking?
Marco Busca, head of indirect private debt at Generali Asset Management (part of Generali Investments): A well-designed private markets fund should preserve the core rationale for investing in the asset class: access to the illiquidity premium. Increasing liquidity features simply to broaden distribution reach can risk diluting returns and creating misaligned expectations. Semi-liquid fund structures are an important evolution, as they open private markets to a wider investor base and offer operational flexibility. However, they inherently introduce cash-management constraints, pacing challenges, and the need for larger liquid sleeves, all of which structurally reduce return potential compared with traditional closed-end funds. The key is to innovate around access and experience, such as smoother subscription processes, better transparency, or more predictable cash flows, without compromising the portfolio’s ability to remain fully invested in high-conviction, long-term private assets. Ultimately, investor communication becomes essential: semi-liquid products are valuable, but their return profile should not be confused with that of pure private equity or private credit vehicles.
Romy Cuadras, head of alternatives and funds solutions at Pictet Wealth Management: At Pictet, we recognise that the illiquidity premium is a core attraction of private markets, rewarding investors for their long-term commitment. Our approach to fund design is therefore rooted in preserving this premium while responding to evolving investor needs. We are highly selective in considering any adjustments to fund structures, and only explore greater flexibility—such as evergreen features—where the underlying assets (such as private debt or core plus real estate) make this more appropriate. For our core private equity and real assets strategies, we remain committed to traditional closed-end structures that best align with the long-term nature of the underlying investments. Equally important is our emphasis on a portfolio approach to private assets. We encourage clients to maintain a programmatic commitment—investing consistently across vintages and strategies—to build diversified, resilient exposure over time. This disciplined approach helps smooth out market cycles, capture the full benefits of the illiquidity premium, and manage risk effectively. Our focus remains on robust portfolio construction, transparent communication on liquidity terms, and alignment of interests through co-investment and fee structures. Ultimately, our goal is to provide access to private markets in a way that is both responsible and sustainable, ensuring that the illiquidity premium remains intact for our clients.
Hamza Azeem, MD, Evergreen Portfolio Management, Hamilton Lane: A key evolution in fund design in recent years has been the rise of evergreen structures, originally created to broaden access for individual investors. Interestingly, these vehicles have also attracted institutional interest; within our evergreen platform, institutions have contributed as much as 20% of total capital. In the context of private markets, where assets are inherently illiquid, liquidity is primarily managed through thoughtful portfolio construction. This requires a clear understanding of the different strategy “buckets” within a portfolio and how they interact to achieve the desired liquidity and risk profile. Effective liquidity management must address both inflows and outflows, which is where scale, experience, data-driven portfolio design, and the considered use of technology become critical. Beyond offering enhanced liquidity opportunities, evergreen funds also deploy capital from day one. By avoiding capital calls and putting funds to work immediately, investors are better positioned to benefit from compounding returns.
• In a European multi-asset portfolio, what is the primary job of private markets today: return enhancement, diversification, inflation protection, or income, and how has that changed over the past three years?
Marco Busca: In European multi-asset portfolios, private markets have evolved from a niche return enhancer to a core allocation serving multiple objectives. Three years ago, the emphasis was largely on return generation, particularly through private equity and opportunistic credit, as investors sought to boost portfolio IRR. Today, the role is more nuanced and strategy-specific. Private credit has become a central income engine, with direct lending providing stable cash yields and a resilient illiquidity premium. At the same time, strategies such as asset-based lending and infrastructure debt are increasingly valued for diversification and inflation protection, given their low correlation to broader markets and linkage to real assets. Meanwhile, secondaries offer a differentiated form of return enhancement, adding a “second-layer” premium through discounted entry into diversified portfolios. Overall, the shift has been from a single return-seeking bucket to a multi-purpose toolkit where each private markets sleeve plays a distinct role in portfolio construction.
Romy Cuadras: The role of private markets in European multi-asset portfolios has broadened over the past three years. While return enhancement remains important, today’s environment of higher interest rates and lower economic growth has shifted the focus toward diversification, inflation protection, and income generation. Private assets now help build more resilient portfolios by providing exposure to less correlated sectors and offering inflation-linked cash flows, especially in real assets and private debt. The “back to basics” approach emphasises operational value creation and disciplined pricing over financial engineering, making a programmatic, portfolio-based approach essential for managing risk and capturing the full benefits of private markets across cycles. This evolution reflects a move from purely seeking high returns to constructing robust, all-weather portfolios that deliver value on multiple fronts.
Hamza Azeem: In a European multi-asset portfolio, private markets investments have been shown to deliver on several of those objectives over time. A growing opportunity set with companies staying private for longer, a superior longer-term return profile relative to public markets (which is even more pronounced in Europe), and the diversification benefits all lend themselves to a strategic allocation to private markets in a multi-asset portfolio.
Depending on the risk appetite and target exposures, investors can choose which segments of private markets to play in, whether they access buyout for long-term growth and diversification, credit for durable income, infrastructure for inflation protection, or VC/Growth to ride the AI-driven industry tailwinds.
• What’s the single biggest red flag fund selectors should watch for when assessing private markets managers in Europe right now?
Marco Busca: The biggest red flag in assessing private markets managers today is any sign of team instability or degradation in investment judgement. Despite the rise of AI and data-driven tools, private markets remain fundamentally a people-driven business. High-quality origination still relies on long-standing relationships, trust, and reputation, not algorithms. Similarly, underwriting may be supported by analytics, but true risk assessment still depends on the experience and pattern recognition of seasoned investors. For that reason, fund selectors should pay close attention to changes in the senior team, unexplained departures, or rapid scaling without corresponding investment in talent. Misalignment of interest, whether through weak GP commitment, overly complex fee structures, or aggressive fundraising pacing, is another critical warning sign. Ultimately, a strong, stable team with aligned incentives remains the most reliable predictor of consistent performance in European private markets.
Romy Cuadras: The most significant red flag today is a lack of transparency—whether in portfolio construction, valuation methodologies, or fee structures. In a market environment where capital is more discerning and regulatory scrutiny is increasing, opacity can mask misalignment of interests, excessive risk-taking, or unsustainable practices. Fund selectors should prioritise managers who demonstrate clear, consistent reporting, robust governance, and a willingness to engage openly on both successes and challenges. At Pictet, we believe that transparency is the foundation of trust and long-term partnership in private markets.
Hamza Azeem: A key risk to watch for is strategy drift. Demand for European buyouts remains strong, particularly in the mid-market, so it is important to look at how much GPs end up raising and how they intend to use the capital. Managers who remain focused on their core strengths are generally viewed more favourably. If strategy changes occur — such as expanding geographically or pursuing larger deals — they should be implemented thoughtfully. Relating to that, alignment between limited partners and general partners is key to driving a continued focus on fund performance.
