Private market fund managers are entering 2026 with record fundraising confidence, and much of that expansion is being engineered out of Luxembourg, according to Carne Group. The Grand Duchy has become the operational nerve centre for European private capital, hosting the majority of Europe’s ELTIFs and an expanding ecosystem of third-party management companies. Yet as assets surge and semi-liquid structures multiply, Carne’s survey finds that institutional investors are sending a firm signal: growth will only be tolerated if governance, valuation discipline and liquidity management meet a significantly higher bar.
A survey by Dublin-headquartered Carne Group of 200 global fund executives and 200 European institutional investors overseeing more than 11 trillion dollars shows 93 percent of managers expect higher inflows this year. At the same time, 99 percent of investors say they are concerned about conflicts of interest in private-market valuations, with 55 percent describing themselves as very concerned.
“Confidence hasn’t disappeared from the industry, it has matured,” said John Donohoe, chief executive officer at Carne Group. “Fund managers are optimistic about growth and expansion, but that ambition is now paired with much sharper investor expectations around valuations, governance and risk. Growth is still very much on the agenda, but it has to be built on stronger foundations.”
In Europe, private markets have become a structural allocation for pension funds and insurers, but regulators and boards are scrutinizing how assets are valued and how liquidity is managed. Managers who fail to meet higher standards risk being sidelined in the next fundraising cycle.
Broad concern over valuations
The sharpest divide lies in valuation practices. In private markets, managers typically determine the fair value of their own holdings, unlike listed equities that trade on exchanges. Just 2 percent of managers currently use independent third-party valuation specialists, according to the survey. Yet 99 percent of institutional investors is concerned about valuation conflicts.
“Investors are willing to allocate capital, but only where governance, valuation discipline and risk management are taken seriously,” Donohoe said. “The next phase of growth in private markets will belong to managers who can meet that higher bar and keep their promises to investors on liquidity.”
“The next phase of growth in private markets will belong to managers who can meet that higher bar and keep their promises to investors on liquidity.”
John Donohoe, Carne Group
Allocators are also paying closer attention to Distributions to Paid-In Capital, or DPI, a measure of how much cash has actually been returned. Paper gains are no longer enough. Managers that convert valuations into realized distributions are more likely to secure repeat commitments.
Systemic risk
Seventy-two percent of institutional investors say they are very concerned about systemic risk in private markets. Ninety-two percent of managers themselves expect systemic risk to increase over the next two years.
That convergence is notable. Private capital has grown rapidly and now competes directly with bank lending and public fixed income. As the sector expands, questions about leverage, liquidity mismatches and interconnected exposures are mounting.
For European investors operating under tighter regulatory regimes, operational due diligence is becoming as important as manager selection. Independent valuations, clear redemption terms and a demonstrable track record are moving from differentiators to minimum requirements.
Luxembourg scales infrastructure
Despite the scrutiny, managers are in expansion mode. Ninety-three percent expect inflows to rise in 2026. Nine in ten plan to launch new products. Almost all intend to raise capital in new overseas markets, and 95 percent are preparing strategies outside their core asset-class focus.
Outsourcing is part of that strategy. Change 2026 shows 93 percent of managers expect outsourcing to increase over the next three years. According to Pascal Dufour, chief strategy officer who leads Carne’s Luxembourg business, the Grand Duchy has become the blueprint for that shift.
“Luxembourg is not only aligned with the global trends, it is in many respects accelerating them,” Dufour said. “As private markets expand and semi-liquid structures gain traction, the jurisdiction’s governance framework, third-party ManCo model and regulatory infrastructure are increasingly central to how managers scale and de-risk.”
“Luxembourg is not only aligned with the global trends, it is in many respects accelerating them.”
Pascal Dufour, Carne Group
He said 19 percent of total assets under management in Luxembourg are now overseen by third-party management companies. In 2024, 13 new management companies were authorized in Luxembourg, 12 of them alternative investment fund managers. Assets under management across liquid and private strategies rose 12.3 percent, while mid-sized management companies with between 5 billion and 20 billion dollars in assets expanded headcount by 22 percent.
Semi-liquid structures are a key area of growth. Eighty-nine percent of managers plan to launch such vehicles within two years, offering periodic redemption windows instead of full lock-ups. The format is designed to attract insurers, pension funds and private-wealth channels seeking exposure to private assets without tying up capital for a decade or more.
Dufour said Luxembourg now hosts 60 percent of all European Long-Term Investment Funds in Europe, and alternative assets continue to grow strongly, with non-regulated alternatives up 13 percent and regulated alternative funds up 10 percent. “Luxembourg’s investor-friendly frameworks and multi-asset structuring ecosystem naturally support that demand,” he said.