Franklin Templeton’s highest-conviction ideas in private markets in 2026 are private equity secondaries, commercial real estate debt and real estate, infrastructure.

Private equity
While exits have picked up, and valuations are down, Franklin Templeton still favours secondaries due to attractive fundamentals and their built-in structural advantages. Institutions and family offices still need liquidity to meet their needs. From an investor perspective, secondaries have several built-in structural advantages that are particularly important in today’s market environment, including shortening the J-curve and returning capital to investors quicker, and diversifying holdings across vintage, general partner (GP), geography, industry and stage (venture capital, growth and buyout).

In recent years, there has been an acceleration of both limited parter-led and GP-led transactions. Since 2015, secondary transaction volume has grown fivefold, with the proportion of GP-led transactions increasing from 18 per cent in 2015 to an anticipated 45 per cent in 2025, Franklin Templeton continued.

Private credit
In 2024, nearly 60 per cent of global flows were allocated to direct lending; however, in 2025 deal flow (comprising 38 per cent of capital raised) slowed dramatically, the investment manager said. Consequently, direct-lending spreads have compressed, and there are growing concerns about future performance. While direct lending seemed to be late cycle, Franklin Templeton finds more attractive opportunities with asset-based finance (ABF) and commercial real estate (CRE) debt, which have their own unique risk, return and correlation characteristics.

Franklin Templeton’s favourite investment in private credit is CRE debt due in large part to the “wall of debt” that will be needed to refinance in the next several years. After the collapse of Silicon Valley Bank in 2023, regional banks have been reluctant to lend capital, which has left a void in the marketplace. The real estate market has significant refinancing needs, with an estimated $2.6 trillion in real estate debt expected to require refinancing between 2026 and 2029

Multi-family and office sectors hold the largest outstanding debt, with offices facing ongoing stress and potential declines in valuation – an environment that creates opportunities for lenders of capital. With more realistic valuations, lenders may be presented with more attractive returns, the firm continued.

Real estate
Franklin Templeton said real estate valuations were down substantially from their 2021 peak, due to various headwinds and concerns about the office sector. In fact, many properties are now available below their replacement costs. The investment manager continues to have concerns about the office sector, but believes that multi-family, industrials and other sectors can provide attractive opportunities.

The firm thinks that a few themes that will play out in the next several years, namely, demographics, innovations, housing, shifting globalisation and resiliency. The macro themes create opportunities across the real estate market.

Multi-family: This sector sits at the centre of the demographic change and need for housing. Millennials and Gen-Z have unique needs and tastes for housing. As Baby Boomers retire and downsize, the firm believes that this is driving demand for age-targeted housing. Historically low housing affordability, caused in part by high mortgage rates but structurally by low supply, is increasing demand for the rental market.

Industrial warehouse: The strong demand and performance of this sector is likely to continue, in Franklin Templeton’s view. Steady consumption growth, buoyed by the higher earnings of the digitally native Millennial and Gen-Z cohorts, should drive e-commerce thus creating warehouse demand. This sector should also benefit from the shifting trade patterns that have led to reshoring and onshoring manufacturing.

Senior housing and medical office: Ageing populations and the resultant need for specialised care will drive growth and demand in senior housing facilities across independent and assisted living, as well as medical office buildings and special outpatient health care facilities. The same trend, coupled with technological innovation will, over the long run, drive the life sciences sector, which includes biotechnology, pharmaceuticals, medical devices and genome research, among other areas.

Necessity retail: As Millennials and Gen-Z enter their prime earning and spending years, necessity retail properties are likely to benefit, alongside e-commerce. Franklin Templeton believes that this will be positive for grocery stores and necessity formats. Technological advancements in omnichannel retail are driving demand near consumers, and Franklin Templeton expects this trend to continue.

Infrastructure
Franklin Templeton believes that infrastructure represents an emerging opportunity, and sees the most attractive opportunities in digital infrastructure, decarbonisation, deglobalisation and demographics. Digital infrastructure includes data centres, fibre optics and cell towers. Decarbonisation and energy transformation reflects the growing emphasis on climate change and the need to respond and rebuild. Deglobalisation is a trend reflecting the need to reshore supply chains and logistics; demographics is the need to respond to population growth in certain regions, and ageing demographics in others.

According to PitchBook, assets under management (AuM) in global real assets are forecast to grow 5.4 per cent annually, reaching $2.4 trillion by 2029 – with about 75 per cent in infrastructure. Advances in artificial intelligence, the energy transition and shifting global trade are driving increased demand for real assets and boosting investor confidence.

Globally, regions are intensifying investment in infrastructure to address economic growth, climate imperatives and technological change. Digital infrastructure requires robust local and global communication systems spanning wireless, wired fibre and data centres. As internet and data demand escalates, Franklin Templeton expects the need for investment across these subsectors to increase substantially.