Why operational edge will define the next phase of private markets

Private markets continue to command a central role in institutional portfolios. Capital flows remain resilient across cycles, and findings from our fifth annual State Street 2026 Private Markets Study confirms the trajectory, with nearly half of institutions expecting to increase allocations over the next two years and only a minority stepping back. The more pressing question now is whether operating models are keeping pace with the growing scale and structural complexity of private markets portfolios.

That complexity is now embedded in how the market functions. Tighter liquidity, more intricate deal structures, and a higher standard for execution are reshaping how portfolios are constructed and how risk is managed. Operating models are no longer a backdrop to investment - they now play a more direct role in determining outcomes, as investors look for the ability to navigate an increasingly interconnected market with clarity and consistency.

These dynamics are global, but regional markets reveal them at different stages of maturity. In APAC, demand for private markets remains strong and broadly aligned with global trends. Yet conversations with investors in Australia point to a more advanced phase of the cycle. At the Private Markets Summit in Sydney last month, the focus shifted decisively toward execution, with greater emphasis on selectivity, valuation confidence, deal structuring, and managing liquidity and exits. These perspectives offer a practical lens on where the broader market is heading and are reflected in our study's findings.

Manager selection is becoming more nuanced

The evolving environment is reshaping how investors evaluate manager relationships. Track record still matters, but it is now evaluated alongside portfolio fit, process consistency, risk management, and alignment of interests.

What stands out more clearly is a broader view of alignment between GPs and LPs, extending beyond economics to include shared expectations around transparency, responsiveness, and information-sharing in more complex markets. Investors now look for partners who can support ongoing, informed decision-making over time.

Operating models are becoming central to performance

The implications for operating models are significant. Our study identifies liquidity management and regulatory requirements as key challenges, but the more important takeaway is how closely interconnected these issues have become.

As portfolios expand across co-investments, secondaries, continuation vehicles, and more tailored structures, demands now span the full investment lifecycle. Liquidity shapes valuation, valuation informs portfolio construction, and both influence how risk is managed at an enterprise level. Delivering timely, decision-useful insight across this chain is becoming a core requirement for institutional investors.

This interdependence was a consistent theme in Sydney. Investors spoke of moving beyond periodic liquidity planning toward more continuous forecasting, underpinned by stronger stress testing and a more deliberate use of secondary market solutions. While APAC is adopting global developments in secondaries and continuation vehicles with some lag, expectations around valuation discipline and execution continue to rise in parallel.

Data expectations are rising

Data sits at the centre of this transition. The study reinforces that institutions continue to prioritise investment in data and technology as private markets scale.

Expectations of what that data should deliver have also increased. Conversations with investors increasingly focus on front- and middle-office visibility, cross-manager comparability, and the ability to independently challenge valuations. As private allocations become more material within total portfolios, data is expected to support consistent, independent decision-making across investment, risk, and operations.

AI and complexity are reinforcing the need for control

The discussion around AI reflects a similar balance between opportunity and practicality. The potential to extract structured insights from unstructured private markets data is well recognised, and our study highlights ongoing investment in this area.

At the same time, the tone among practitioners remains measured. AI is viewed as an enabler that depends on data quality, governance, and trust. While it can scale insight, AI also introduces new demands around oversight and validation, requiring strong foundations to ensure reliability. The near-term shift is toward more dynamic, exception-led oversight, where technology enhances visibility but human judgement remains central.

Complexity is also sharpening the focus on areas such as valuation, allocation and co-investments, which require closer scrutiny supported by independent challenge and clear decision frameworks. As structures become more flexible, expectations around transparency and discipline continue to rise.

Operating model design will define the next phase

For APAC institutions, the direction of travel is already clear. Private markets continue to expand both in scale and complexity - and with that, the demands placed on how portfolios are managed are rising as quickly.

The next phase of growth will not be driven by allocation alone; it will depend as much on operating model design. As portfolios grow more complex, performance will increasingly be shaped by data architecture, valuation processes, workflow integration, and the ability to combine technology with trusted oversight across the investment lifecycle.

From my perspective, the best positioned institutions for this phase are those that treat operating model evolution as a core investment capability, building strategies not just for access but also for control, consistency, and adaptability. In a market that is becoming more selective and interconnected, resilience will be shaped by how well organisations are built to manage complexity - and how effectively they can act on it in practice.