Outlook 2026: Five questions that could shape 2026 and beyond

At this time of year it is always tempting to make predictions about the next twelve months like how markets might perform, or which asset class will outperform. 

As impossible that these types of predictions are to get right, they make for neat media headlines.  However, we think that they are rarely the questions that matter most for long-term investors.

For investors with time horizons measured in decades, rather than quarters, outcomes are shaped less by where markets happen to be in twelve months’ time, and more by the structural forces that unfold gradually and compound quietly.

With that in mind, this outlook is structured around five questions that we believe are particularly relevant for New Zealand investors with long-term horizons.  These questions cut across asset classes, regions, and investment styles, and which are unlikely to be resolved quickly, but capture factors we need to be acutely aware of when building portfolios today.

Our specialist panel

Mark Perry - Head of Alternatives Manager Research at Wilshire.

Mark has over 15 years of private markets investment experience, currently chairing Wilshire's Private Markets Manager Research and Private Markets Investment Committee.

David Johnson - Senior Vice President, Portfolio Manager at Wilshire. David sits on Aurellan’s Investment Committee. At Wilshire, he is responsible for developing and implementing multi-asset investment solutions for institutional discretionary clients. He is also a voting member of Wilshire’s Investment Committee and the Alternatives Oversight Committee.

Chris Di Leva – CEO, CIO at Aurellan, in this role he is responsible for the investment outcomes of our clients. Prior to co-founding Aurellan, Chris was Head of Global and Multi Asset Investments at Harbour. Prior to that he was a Portfolio Manager, responsible for growth assets, at Mercer.

Rachel Weld – Investment Principal at Aurellan. Rachel co-founded Resolution Capital which is a well-known Global Real Estate investment firm and worked for pre-eminent NZ investment firms Southpac and Doyle Patterson Brown. She is also the Chair of Aurellan’s Investment Committee.

Paul Carmen – Founder and Managing Partner of Private Capital Group. Paul’s expertise has been gained from extensive international positions. These included running the global sponsor and acquisition finance platform for Mizuho Bank with teams in London, New York, Hong Kong & Sydney. 

Q1: What worries and what excites you about private markets right now?

Why we are interested from an investing perspective: Private markets have moved rapidly into the mainstream, with them being included as part of Kiwi’s portfolio, including  KiwiSaver funds. Much of the 2025 debate focused on their potential to lift returns and improve diversification at a time when public markets are more concentrated and fully valued.

But those higher expected returns come with trade-offs. Private assets introduce risks around liquidity, valuation, leverage, transparency, and governance, and some of these were tested in 2025. Australia’s regulator ASIC scrutinised how private assets are valued and managed within superannuation funds, as well as highlighting a range of concerns in a report on the private credit sector.  Further abroad stresses in parts of the US private credit market, including the restructuring of First Brands, highlighted how quickly risks can surface when conditions tighten.

What Wilshire’s Mark Perry has to say on the matter: Private markets in 2026 sit at the intersection of structural transformation and persistent uncertainty. Across regions and strategies, the landscape is being reshaped by four global megatrends—AI, geopolitics, macroeconomic volatility, and the energy transition—which together create both meaningful risks and compelling opportunities. The environment demands heightened selectivity, disciplined underwriting, and a forward-looking approach to portfolio construction.

What worries us is the breadth and persistence of macro and geopolitical uncertainty. Elevated valuations in technology and AI, uneven inflation trajectories, and divergent regional interest rate paths all contribute to a more fragile backdrop. Geopolitical fragmentation—from U.S.–China tensions to European political instability and shifting tariff regimes—continues to disrupt supply chains and cross border investment flows. Liquidity remains constrained across several private markets, with exit activity still below historical norms, particularly in Europe and parts of the global venture ecosystem. In private credit, intense competition has compressed spreads and weakened underwriting standards in large cap direct lending, while distressed opportunities remain limited despite growing signs of credit stress. Real estate markets, especially office and logistics in Europe and residential sectors in China, continue to experience slow and uneven recoveries. Overall, the risk environment is defined by policy unpredictability, valuation dispersion, and the potential for macro shocks to expose accumulated vulnerabilities.

What excites us is the abundance of structural, long duration opportunities emerging across global markets. AI is driving unprecedented investment in data centers, digital infrastructure, industrial automation, and productivity enhancing technologies—supporting strong pipelines for buyout, growth equity, and infrastructure strategies. The energy transition is unlocking multidecade capital needs in renewables, grid modernization, storage, mobility, and decarbonization technologies, with Europe and Asia Pacific particularly active. Private credit continues to expand as banks retrench, with smaller transactions and solution premium lending offering attractive risk adjusted returns. Real assets—industrial, logistics, data centers, and multifamily—benefit from improving fundamentals and durable thematic tailwinds. Venture capital, while reset, is seeing concentrated strength in AI, robotics, and deep tech, supported by improving exit markets globally. Across regions, the combination of structural demand, policy support, and persistent market inefficiencies is creating compelling opportunity sets for specialized, disciplined managers.

Q2: What data are you seeing that suggests AI may not be a bubble?

Why we are interested from an investing perspective: This might be the single most important question shaping equity returns over the next few years, because so much of global index performance is now riding on a handful of “AI winners”. The top 10 stocks in the MSCI ACWI are ~25% of the index today. By comparison, ten years ago the top 10 were approximately 8%.  Interestingly just two companies in today’s top 10, Apple and Microsoft, were in the top 10 a decade ago.

That concentration matters because valuations are also stretched relative to history. The Shiller cyclically adjusted price-to-earnings ratio is around 40, which is close to the most elevated levels in history. The only clearly higher episode was the dot-com era peak (the maximum through history was 44 in Dec 1999), and the subsequent unwind led to a lost decade for equity investors in the US.

We have deliberately framed this question around what can go right, rather than what can go wrong. After all, share markets are ultimately a triumph of the optimists. The challenge for investors is distinguishing between optimism that is being validated by data, and optimism that is simply being priced in.

What does Wilshire’s David Johnson and the wider Wilshire research team have to say on the matter? Equities continue to be supported by resilient earnings despite low expectations for Q3 and Q4 of 2025. History suggests that consensus expectations are typically conservative, as actual results have consistently outpaced consensus expectations, as shown in the graph below. Earnings for Q3 significantly outpaced expectations, delivering 13% earnings growth, well above the 6% consensus expectation. Forward earnings expectations into 2026 appear far more optimistic. While higher expectations set a high bar for earnings, the gains in productivity from AI and automation may fuel higher margins and profitability growth, both of which are supportive of multiple expansion.

Source: Goldman Sachs Investment Research, Wilshire. For illustrative purposes only.

While valuations appear expensive based on the 12-month forward earnings multiple, equities are less expensive when adjusting for current profit margins. Ultimately, it’s reasonable for investors to pay a higher valuation for companies that deliver high profit margins and earnings growth, which is the case for U.S. equities today relative to history. We are not dismissing the apparent pockets of exuberance that exist in certain sectors within the equity market, and we acknowledge the growing concentration of thematic (i.e. AI) and idiosyncratic risk in U.S. equities today. However, we also believe that it’s important for investors to appreciate the structural shifts that could drive stronger fundamentals and multiple expansion in the near- to intermediate-term.

The rise in capex among hyperscalers has led to higher levels of earnings growth downstream for many companies tied to the expansion in AI. The chart below shows that consensus expectations indicate a substantial decline in capex growth among hyperscalers into 2026. This has implications for economic growth, as capex related to AI has been a notable driver of private domestic investment, while also supporting earnings growth among AI-related companies. Hyperscalers are facing increasing scrutiny regarding the growing level of capex, and if consensus estimates are accurate, a slowdown in capex could have negative consequences for economic and revenue growth. This is a risk to equities in 2026 that we continue to monitor. (editor’s note: this is a rapidly changing situation where consensus numbers are being upgraded due to increased capex guidance during earnings season. This has contributed to recent market volatility)

Source: Goldman Sachs Investment Research, Wilshire. For illustrative purposes only. Q4 2025 onwards are forecasts.

Q3: What would it take for the NZ share market to outperform?

Why we are interested from an investing perspective: 2025 marked the third consecutive year of underperformance for the New Zealand share market relative to global equities. Over that period, persistent valuation discounts have not been enough to offset weaker earnings growth, limited sector breadth and ongoing capital outflows.

This prolonged underperformance has begun to change investor behaviour, with domestic and offshore capital increasingly reallocating away from New Zealand equities, which can at times create a self-fulfilling loop. That raises a more fundamental question than short-term relative returns: what would need to change, structurally or cyclically, for the New Zealand share market to regain relevance and outperform?

What Chris Di Leva has to say on the topic. We recently covered this topic in a research piece on “Why the case for New Zealand shares isn’t dead yet?” in that article we go in to the structural reasons why New Zealand has some benefits for tax paying investors. We also look into periods when the NZ market has outperformed and found the following:

While we live in an increasingly globalised world, the New Zealand market is still different enough to march to the beat of its own drum. This has served investors well in the tech bubble in the early 2000’s where the New Zealand market rose modestly from late in the year 2000 to early 2003, while at the same time, the S&P 500 Total return index fell some 45%. Somewhat more famously, the Nasdaq Composite which hit a high in March 2000 took fifteen years to reclaim its previous high. Generally, the NZ market has held up well in times of crisis, as can be seen below.

Source: MSCI, S&P. As at 30 September 2025.

So while it is a rather pessimistic comment to make as we head into a new year, a scenario where the NZ market could outperform is one where global markets wobble. Another scenario is where the sectoral composition of the global market turns from a tailwind into a headwind. Global shares (MSCI ACWI) have become increasingly heavily weighted to technology-related sectors, such as Information Technology, Consumer Discretionary and Communication Services sectors, which make up around 47% of the index, NZ has around 9% in these sectors. NZ has substantially higher weights in healthcare which is a sector which has been under pressure globally due to changes in the US healthcare policy agenda.

Over the shorter term there is the improving cyclical outlook which should be of benefit. New Zealand has underperformed economically coming out of the COVID lockdowns, and depressed house prices have weighed on domestic balance sheets, confidence, and credit growth. But there are reasons to be optimistic. The Official Cash Rate (OCR) has been cut by 3.25% over the last sixteen months, with 1.00% over the past four months, which should continue to help household balance sheets and encourage activity.

Q4: Where to for global listed property?

Why we are interested from an investing perspective: With valuations elevated across many asset classes, particularly global equities, this feels like an appropriate time to revisit sources of diversification that are underrepresented in many portfolios. Global Listed Property offers exposure to real assets with contractual income streams and differentiated drivers of return and has undergone a significant repricing following the sharp rise in interest rates.

Is the sector primed for better returns?

To answer this question we talk to Rachel Weld: The performance of Global Real Estate Investment Trusts (GREIT) has disappointed with returns in recent years falling below the historical average. The narrative on GREITs price weakness has centred on the rapid rise of interest rates, the demise of the office sector and the impact of e-commerce on retail property. While there has been merit to these concerns, today, the underlying fundamentals of the sector overall appear to be in solid shape with low property vacancy rates and limited new building supply.  Many GREITs have strong balance sheets, well-laddered debt maturities, and access to diverse sources of capital. Furthermore, due to significantly higher construction costs many are trading at or below replacement costs making new development uneconomic at current rent levels.

 Interestingly, in April 2025 Blackstone raised €9.8bn, for a real estate drawdown fund and given many GREITs are trading below their replacement costs and private market values, the sector may be poised for increased corporate activity.  

GREITs offer investors a liquid exposure to some of the world’s best real estate assets, a diversified exposure to all sectors of real estate. The listed GREIT universe has evolved significantly since Covid as the office sector now makes up less than 10% of the GREIT benchmark, down from over 20% in 2007. Sectors like data centres, healthcare (seniors housing), and industrial properties are much larger segments, benefiting from long-term growth trends.

With their ability to diversify portfolios and provide a steady income stream, GREITs could become a valuable addition to an investor’s portfolio, especially as the sector begins to recover from its recent undervaluation. Perhaps 2026 and beyond is going to be times for the sector to finally shine again.

Q5: How big can private credit get in NZ?

Why we are interested from an investing perspective: The Active Investor Plus (AIP) Visa is New Zealand’s main residence-by-investment pathway. Changes introduced in April 2025 simplified the regime and broadened eligible investment options.

Uptake has been materially stronger than under the previous settings. By mid-December 2025, Immigration New Zealand had received 491 applications, representing 1,571 applicants and a minimum potential investment of approximately NZD $2.9 billion. So far 129 applications have been approved with committed investment $770m. Much of the activity has been in the “growth” category which much of the flows within the growth category being allocated to private credit.

Private credit is long-established asset class in the US and Europe. There, regulatory changes following the Global Financial Crisis materially increased bank capital requirements, prompting banks to retrench from large parts of middle-market and sponsor-backed lending. Non-bank lenders stepped in to fill that gap, and private credit has since become a core component of institutional portfolios. Large US pension funds and insurers typically allocate mid- to high-single digits (around 7–10%) of portfolios to private credit, with similar levels evident across European institutions.

Historically, the asset class has delivered attractive risk-adjusted returns, benefiting from an illiquidity premium, floating-rate structures, and tailored lender protections through covenants and bespoke deal terms. Over long periods, private credit has outperformed public leveraged loans and core fixed income. These characteristics have underpinned its institutional appeal offshore and help explain the growing interest now emerging in New Zealand.

The asset class does not come without challenges, one of which is manager selection, which our global partner Wilshire often points out to us is very wide within private asset classes, meaning that investor experiences in the asset class have not been uniformly positive. Further, the term “private credit” encompasses a broad church of strategies with materially different risk and return profiles. These range from higher-risk segments such as distressed debt and opportunistic special situations, through to more conservative forms of lending such as senior secured direct lending and bilateral SME finance.

However, private credit remains a relatively nascent asset class in New Zealand though flows are increasing largely due to AIP. Like in the US and Europe, structural tailwinds exist for the sector here, but how big the market could get is still unknown and there is some worry, which is shared by this author, around how potential future changes in AIP could impact the asset class.  

To answer How big can private credit get in New Zealand? And to address some of the challenges and opportunities of a growing asset class, we ask PCG’s Paul Carmen.

Being part of the development of a new asset class in any jurisdiction certainly brings its fair share of challenges and opportunities. New Zealand is no different and yet much of this development in our domestic market represent somewhat of a well-trodden path offshore. When establishing a prior private credit platform in Europe in 2003, we witnessed first-hand the stark contrast between a lack of investor familiarity and the flourishing asset opportunity driven by banks' withdrawing capital from business lending.

 At that time, a lack of market data and manager track record, created hesitancy in the eyes of institutional investors. This is very much in evidence in NZ 20 years on and yet, given a tangible lack of private credit competition from offshore in our domestic market given the difficulties of a fly in and fly out approach, and the impact of RBNZ's bank capital adequacy requirements on NZ bank appetite, there is a tangible opportunity to establish the asset class as a core element of the NZ market and as part of investors' asset allocation strategies.

For context, business lending in the US, where private credit is mature and a common feature of investors' asset portfolios, is broadly comprised of 80% private credit and 20% bank lending. This evolution from an historically bank dominated market to a private credit centric model has played out over the past 30 years and is summarised in the graph below:

The New Zealand economy is dominated by privately owned small and medium size companies. Historically these businesses have relied on banks for funding and to their support growth. RBNZ data indicates that the volume of bank lending to NZ businesses (excluding Property and Agriculture debt) totals circa NZD 80b. In a mature market such as the US, between 65-80% of this might be provided private credit; implying a right sized mature domestic private credit market of somewhere between NZD 50-60b. Such a level of penetration by private credit has in reality taken many years to achieve in the US. However, the sum total of assets under management amongst New Zealand's private credit funds today is estimated to be less than NZD 1b, suggesting substantial room for expansion as the asset class starts to embed in the portfolios of institutional investors locally.

Against this asset opportunity, the reality of investor unfamiliarity creates a genuine barrier to entry. Fund Management requires capital for investment and in an environment where performance data is limited and opaque, institutional investors are only now starting to evaluate the domestic investment opportunity within private credit. To date, the majority of New Zealand managers do not routinely report data through Morningstar or similar sources, and independent manager ratings and reports have yet to become a common feature. Whilst these steps take time, building an understanding of manager track records around AUM growth, deployment and performance is a critical step for investor as part of their due diligence. Moreover, forming teams with experienced risk managers and with relevant investment committees, who have benefited from exposure to and deep involvement in the global private credit markets, is limited domestically; certainly, the historically bank dominated New Zealand credit markets have not been conducive to widespread fund management expertise in private credit. This is now starting to change.

Offshore, much of the initial investor base has been from high networth investors, which over time has been augmented by institutional investors committing to funds as manager performance develops. This pattern is very much alive in New Zealand today. Managers and investors look for diversification in asset portfolios; global norms point to prudent risk management and a granular asset base, often with 50+ portfolio assets within a given private credit fund. Similarly, investors are keen to understand investor diversification and to ensure no undue concentration or influence is exerted by any single investor. These all combine to create somewhat of a chicken and egg environment in nascent markets.

AIP has provided a step change to those local private credit managers who have been building track records and relative domestic scale over the post covid period. Many AIP investors are highly experienced investors and a number have had careers and/or are long term investors in alternative assets. The arrival of AIP capital has been instrumental in enabling local private credit managers to build and show both asset under management growth and, perhaps more importantly, deployment. This has helped to demonstrate the opportunity in the asset class and to enable funds to build their necessary diversification and attract experienced teams.

As fund scale and track records are further evidenced, the New Zealand market, as witnessed offshore, will start to attract additional institutional investors and thereby enable further scaling and further investor diversification. The local market is starting to evidence this next step, and with this, local managers are able to broaden the nature and scope of their private credit funds to suit specific investor profiles and align these with asset opportunities. This is most visible for instance with domestic private credit managers starting to launch infrastructure debt funds to complement their existing direct lending strategies.

All of this plays out in the context of an environment of modest competition and prudent asset structures and terms. In fact, New Zealand has a very favourable legal environment which enables managers to structure deals with registered and enforceable security to support the contractual cashflows represented by the loans these funds originate and extend. These deals are typically private in nature and this allows access to proprietary due diligence in relation to the financial performance, projections and prospects of the companies funds lend to. It also helps to foster a deep and direct relationship with the borrower's owners and management teams. This creates an environment where loans are tailored to the cashflows and needs of businesses and avoids the one fits all approach historically seen in the market.

Since fund returns are derived from a borrower's ability to service its debt, fund performance is not impacted by public market technicals. This removes any correlation with public markets. Moreover, since the majority of private credit loans are subject to first ranking security, the embedded equity value in these businesses, provides a strong defensive moat against the impact of credit related underperformance. 

In data driven markets, compiling and demonstrating performance takes time. However, cadence has been developing over the past 18 months and fund portfolios are now showing positive signs of requisite asset diversification, origination pipelines and AUM development, which combine to enable the local market to move towards the kinds of investor asset allocation patterns and strategies witnessed in the more mature and established markets offshore.

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