Advisors lean on private markets as volatility rattles public portfolios

Financial advisors are doubling down on private market allocations even as turbulence in public equities and a wave of redemption requests at major private credit funds complicate the outlook for alternative investments, according to new survey data from Blackstone.

In Blackstone's Spring 2026 Advisor Pulse Survey, which polled financial professionals across the US, Europe, the Middle East, Africa and Asia-Pacific, nearly all respondents – 90% – said the current macro environment has led them to increase or maintain private equity allocations in client portfolios. Just 2% said they are pulling back.

The results land at a somewhat awkward moment for private markets. Investors sought to withdraw more than $10 billion from major private credit funds in the first quarter of 2026, triggering redemption gates at several high-profile vehicles. BlackRock's $26 billion HPS Corporate Lending Fund activated its gate in March, approving $620 million of the $1.2 billion requested. Blue Owl Capital has suspended redemptions on its $1.6 billion OBDC II fund and began winding it down. Blackstone temporarily raised its redemption limit from 5% to 7% and committed $400 million in firm and employee capital to help absorb a record $3.8 billion in withdrawal requests.

Doug Ostrover, co-chief executive officer at Blue Owl Capital, offered a stark take on the relative risk picture. "If you're worried about direct lending at all, you've got to be really worried about PE," he recently told Bloomberg.

When asked about the primary role of private real assets in client portfolios, 50% of US respondents cited diversification away from public markets – reflecting what the survey describes as a renewed focus on hard assets with low obsolescence (known by the increasingly popular acronym HALO) and a search for lower-correlation investments. Income generation was the second most common answer, at 34%, with inflation hedging and capital appreciation each drawing 5%.

The survey also reveals how advisors are thinking about manager selection in private credit specifically. Track record ranked as the most important rubric, cited by 36% of respondents, followed closely by credit underwriting expertise at 33%. Firm size and scale came in at 22%, while default and recovery rates trailed at 9%.

That emphasis on proven performance reflects a broader industry reckoning. In a note authored by Kyle Jorgensen, a director and portfolio manager at Hirtle Callaghan, the investment advisory firm argued that the recent pressure within private credit "reflects a confluence of factors rather than a single systemic breakdown" – pointing to rapid asset class expansion, a broader and less experienced retail investor base, isolated credit events and rising anxiety over software borrower exposure.

Read more: When clients ask about private credit: How advisors can address common concerns with confidence

Jorgensen's note drew a distinction between structural and fundamental concerns, writing that "a fund that is gating withdrawals because investors are nervous is a very different situation from a fund that is gating because the underlying credits are deteriorating."

Software loans, which make up 20% to 25% of many direct lending portfolios, have drawn particular scrutiny amid questions about whether AI-driven disruption could erode the stable recurring revenues those loans were underwritten against. The rise of agentic AI has unsettled assumptions about customer retention and incremental margins that underpinned much of the middle-market software lending boom.

Read more: Jamie Dimon's three-pronged warning: Iran inflation risk, private credit cracks, and AI's unknowns

The concern extends beyond credit. Private equity firms that financed software buyouts at peak valuations in 2020 and 2021 now face a slow-moving reckoning of their own, with exits delayed and refinancing risk building as equity cushions compress.

(Author's note: Updated fifth paragraph to reflect US-specific data.)