Amid growing concerns about the global economic outlook, rising market volatility and elevated uncertainty, Fitch Ratings cut its outlook for European alternative investment managers (IM) a couple of months ago — but so far, the fears that prompted that move are proving unwarranted.
In a new report, the rating agency noted it downgraded its outlook on large alt managers to “deteriorating” from “neutral” in mid-2025 due to the feared fallout from erratic U.S. trade policy — including weaker growth prospects, higher volatility and rising geopolitical risk — but said the sector has held up well since that revision.
“[F]undraising has proven robust, aided by improved investor appetite for regional assets and healthy flows into infrastructure and private equity, partly offsetting global pressures on deal activity, exits and performance,” the report said.
While the environment for deals, and particularly investment exits, remains “difficult,” Fitch said large alt managers are “well positioned” to weather the conditions, as their “scale, diversification and business models with predictable fee-related earnings” underpin their credit quality.
Certain alt IMs “could face valuation marks from negative fair-value movements,” the report said. “However, effects should be largely unrealized and mitigated by resilient fee-related earnings and sound leverage positions.”
The sector may also see intensifying competition as the tougher investment climate produces varying performance and likely drives investor flows to larger, more diversified businesses, it suggested.
“Private wealth channels offer significant growth potential for alt IMs,” it said. “We also expect rising allocations from insurers and pension funds, including U.S. retirement plans.”
Additionally, partnerships and joint ventures designed to drive wider distribution “are likely to increase,” Fitch said.
However, these trends could also lead to higher risks, the report noted.
“[G]rowth in semi-liquid vehicles could introduce greater earnings volatility if exposure becomes material, while wider retail penetration could also increase regulatory, legal and reputational risks,” it said.