Any capital-raising begins with the same considerations: equity versus debt, private versus public, speed versus certainty, cost versus control. Macro conditions will always affect how those trade-offs are evaluated and how parties on both sides assess risk, deal timing, the permanency of financing and the “true” cost of capital. But today, the context in which these choices are made is increasingly nuanced as capital flows shift in response to a variety of regulatory and political forces, public and private markets converge, and new, more flexible financial instruments evolve.
These dynamics create complexity but also opportunity for businesses looking to optimize their capital structure in a more volatile, uncertain world.
The rise of private capital
One of the defining recent trends in financial markets has been the huge interest from investors in private market investments. Globally, private capital firms (a group which includes venture capital and sovereign wealth funds as well as managers that invest in private equity, private credit, infrastructure, real estate asset classes and more), are projected to grow their assets under management (AUM) to approximately USD18 trillion by 2027, a roughly twentyfold increase since the start of the Millennium. This growth is supported by the fact that institutional investors such as pension funds and insurers are allocating an ever-larger share of their portfolios to private credit markets in search of yield and diversification.
The reasons for this shift are well understood: post-global financial crisis capital adequacy rules and tighter supervisory regimes which curtailed banks’ risk taking and created an opening for private credit funds; coordinated interest rate cuts and quantitative easing which drove a debt-fueled private equity (PE) buyout surge; the ability of PE and private credit managers, among others, to deliver higher returns compared to other types of investment.
Multi-strategy asset managers invest across public and private markets
The focus from investors on private companies and assets has been accompanied by a sharp decline in the number of publicly traded companies. A study from the Tuck School of Business has found that there are now more than four times as many private businesses in the U.S. with revenues over USD100 million than there are public companies with comparable earnings. The sheer volume of liquidity available from private credit funds has meant that businesses are no longer limited to tapping public equity markets to build scale.
Today, the largest multi-strategy asset managers move fluidly between public and private and equity and debt markets, routinely offering a full range of funding solutions (including direct lending, asset-backed finance, infrastructure debt and NAV facilities) across the credit spectrum as they build their AUM to support client demand for diversification and increase their fee income.
Against this backdrop, a corporate’s investor base is no longer defined by its equity listing status. A private company raising capital may find itself engaging with the same institutional investors (and others) that actively target public equities; these investors in turn are bringing public market expectations around valuations, disclosures, and governance to private businesses. The practical consequence is that companies must enhance their investor relations capabilities to understand and deliver against the expectations and decision-making frameworks of a broader and more diverse set of capital providers.
Strong interest from investors in public and private debt capital markets
In the debt capital markets there is strong interest from private capital investors in both private and public markets, and across a range of assets. The OECD has reported that the amount of corporate bonds outstanding stood at USD36.4tn at the end of 2025. It projects this number will increase, reinforcing the continued centrality of public debt markets in global funding.
Indeed, for corporate boards, the public bond markets continue to offer a set of structural advantages that have become more, not less, relevant as trading and investor bases have evolved.
Access to a wide, diversified and international investor base (which includes private capital investors) supports larger issuance sizes, lower cost of capital, enhanced liquidity, scope for repeat issuances and secondary market liquidity; all of which can reduce funding concentration risk and provide flexibility across currencies and maturities.
Private capital providers target securitization deals
The securitization market has undergone significant transformation in recent years, with private credit funds, alternative asset managers and other non-bank institutional investors playing an increasingly prominent role in both the origination and investment side of structured finance transactions.
As banks have sought to optimize their balance sheets, private capital providers have stepped in to fill the resulting funding gap, deploying capital across a wide range of asset classes including leveraged loans, consumer receivables, trade finance, and real estate debt.
Private credit funds often invest in private securitization transactions, which afford them the ability to gain exposure to bespoke portfolios of assets without the commercial terms being widely known in the market. These privately negotiated structures offer several advantages to both originators and investors: for originators, private securitizations provide a flexible and efficient means of accessing funding without the disclosure obligations and marketing processes associated with public or broadly syndicated offerings. For investors, they present opportunities to negotiate tailored structural protections, enhanced returns, and access to asset classes or credit profiles that may not be readily available in the public markets.
Secondaries and tokenization offer promise of greater liquidity
Liquidity, or the lack of it, has historically been one of the sharpest distinctions between public and private markets. However, the private capital secondary market has grown substantially in recent years, with general partner (GP)-led continuation vehicles, fund-level tender offers and dedicated secondary trading platforms all reaching greater scale and sophistication.
Meanwhile, the tokenization of real-world and financial assets (which we explore in more detail here) has the potential to lower minimum investment thresholds and further increase liquidity in traditionally illiquid asset classes. If the infrastructure supporting tokenization matures, it could help to address retail investors’ concerns over liquidity and solidify the investor base for private and alternative assets, including by creating investment opportunities for smaller institutions.
Closer ties between banks and private credit providers
Private credit has been one of the asset classes that has seen the biggest growth in recent years, with data from Pitchbook revealing a 50% increase in AUM between 2020 and 2025. As more investment has flowed in, private credit funds have been able to compete directly for larger financing deals that would historically have been serviced via the broadly syndicated loan and bond markets. As they have done so, the terms of syndicated loans and private credit facilities have converged, with pricing and deal certainty—as well as the range and flexibility of private credit instruments—now the primary distinguishing factors.
As well as competing for business, financial institutions and private credit providers are also working together in a variety of ways. In the securitization market, banks and private credit funds are increasingly forming strategic partnerships with co-investment structures to mutual advantage, particularly in the commercial real estate, infrastructure, leveraged loan, and corporate loan sectors. Banks and private credit funds are also collaborating on forward flow arrangements, jointly sourcing lending opportunities that can be financed by both sides directly or through specially established funding vehicles. In the fund financing space, banks are financing funds above the asset level in a variety of ways, enabling them to lend ahead of securing cash from their investors. There are many reasons why such arrangements are attractive to both sides, including increased lending capacity and access to a wider range of lending relationships and products that deliver more tailored financing solutions for businesses.
As private capital continues to expand its presence across the full range of funding solutions, authorities and regulators in some markets are scrutinizing the potential systemic risk and impact on financial stability. Such apprehensions have been underscored by notable credit events on both sides of the Atlantic: the U.S. bankruptcies of Tricolor and First Brands Group and the UK administration of Market Financial Solutions, a specialist short-term and bridging lender, which together resulted in millions of pounds of losses borne by private credit funds and investment banks.
Further, private credit portfolios are often heavily concentrated in the software and technology sectors, raising questions about the vulnerability of these exposures to disruption driven by advances in artificial intelligence. These concerns have been compounded by the fact that certain credit funds with significant exposure to the software sector have recently moved to limit investor redemptions, a step that has unsettled market participants and drawn attention to the liquidity risks inherent in private credit structures.
Taken together, these developments have fueled a growing unease among investors and regulators alike about the robustness of private credit in the face of rapid technological change and shifting market conditions, and the potential impact on financial stability of a prolonged period of stress in the sector.
Increasing interest in hybrid instruments
As capital moves between and within public and private markets, we are seeing certain private credit investors with wider investment mandates pursuing more flexible and sophisticated investment products. Here there is increasing interest in preferred and structured equity instruments, which blend characteristics of both debt and equity in ways that can be tailored to meet the needs of issuers and investors alike.
At their core, these structures offer holders a priority claim on distributions and assets ahead of investors in common equity, while typically carrying debt-like features such as fixed or floating dividend rates more commonly associated with debt. Unlike debt, however, as equity instruments they do not confer the right to force an issuer into insolvency if payments are missed or a right to a return of their initial investment amount without other relevant protections.
Preferred equity instruments are extremely flexible in that they can be designed as pure fixed-return securities, or can have conversion rights into common equity or other forms of upside participation. The potential to incorporate distribution waterfalls and governance rights allows them to be shaped to the risk profile, and the specific investor requirements of a given situation.
Their appeal to investors lies in their combination of enhanced returns and downside protections; preferred equity typically offers yields higher than that of senior debt (compensating holders for taking on equity-like risk) while preserving many of the protective features associated with credit instruments.
In an environment where quality assets are relatively scarce and competition for investment opportunities among credit funds has intensified, hybrid instruments are a creative way for companies to attract capital and for credit funds to deploy. They can be used in a range of contexts: to finance acquisitions or capital expenditure, to fund liquidity provided to existing shareholders, to support joint ventures or aggregator vehicles, or (particularly in special situations) to refinance maturing debt where fresh credit or new common equity is either unavailable or economically unattractive.
For investment-grade issuers seeking to raise capital without compromising their credit ratings, preferred equity can offer a valuable compromise, provided it is structured to avoid features such as mandatory payment terms which could lead ratings agencies to treat it as debt which could potentially trigger a downgrade.
However, preferred equity instruments can also have a meaningful impact on governance. Investors will often look to negotiate board observation or participation rights, enhanced information covenants and consent rights over material decisions including future financings, M&A activity, dividend distributions and changes to senior management.
Unlike common equity holders whose interests lie in value maximization, preferred equity holders may be more concerned with protecting their liquidation preference and securing their contracted return, whether through PIK interest accrual or equity ratchets tied to exit outcomes. This distinction can create tensions: boards and management teams may find themselves intermediating between a sponsor focused on positioning for eventual exit and new investors more concerned with downside protections and yield preservation. These competing priorities must be handled carefully, with the company's long-term strategic priorities balanced with the interests of different groups of investors.
In addition, preferred equity instruments frequently include anti-dilution provisions, payment-in-kind compounding and participation rights that can materially alter the economics of future transactions, which in turn can constrain strategic optionality in ways that may not be immediately apparent.
Geopolitics and industrial policy redirect capital flows
These market shifts and financial innovations are taking place amid an increasingly complex public policy environment, as governments across the world implement a range of measures designed to direct capital flows in service of their political objectives. Administrations are increasingly using subsidies, tax reforms and other regulatory instruments to channel private capital toward strategic sectors, including artificial intelligence, semiconductors, critical minerals and defense. In response, credit providers have launched dedicated investment initiatives shaped around these policy priorities.
In the United States, the America First Investment Policy has introduced incentives to drive domestic and foreign capital into targeted industries, while the EU’s Security Action for Europe (SAFE) instrument provides financial support for member states to boost defense spending and catalyze private investment in the sector (an issue we explore in more detail here).
In parallel, regulatory frameworks are serving to constrain cross-border financing flows in some areas. Inbound and outbound investment screening regimes, such as those administered by the Committee on Foreign Investment in the United States (CFIUS), are restricting international capital deployment in technology-sensitive sectors and critical infrastructure. Sanctions, export controls and entity-based restrictions are fragmenting capital pools, forcing multinationals to navigate an increasingly complex and sometimes contradictory patchwork of jurisdictional rules. Trade disputes, generalized policy uncertainty and transnational conflicts are further complicating the picture (the imposition of sanctions in connection with the war in Ukraine for example had a significant impact on financial infrastructure, notably the freezing of Russian central bank reserves and the selective exclusion of institutions from SWIFT).
Governments are also pursuing reforms designed to rebalance the focus of financial market supervision away from risk-management and towards growth, to facilitate investment and to increase market participation among retail investors in a bid to unlock new sources of capital.
As an example, the rules that govern equity issuance on exchanges including the London Stock Exchange have either been rationalized or are being considered for simplification, while the UK government has also introduced measures to streamline secondary equity capital raising for both public and private companies.
Similarly, a new public offers and prospectus regime in the UK has been designed to lower the regulatory and practical barriers that previously discouraged issuers from extending offers to retail investors (including in the public bond markets), while still maintaining investor protection standards.
Elsewhere, the EU's Listing Act and Retail Investment Strategy package, and similar initiatives in Asia-Pacific, aim to increase participation among retail investors. Meanwhile the EU Commission is pressing ahead with plans to harmonize EU capital markets as it looks to channel a greater proportion of individual savings into European businesses.
Investor protections are also a priority as governments look to draw capital and issuers into their local markets. The Nasdaq, for example, has proposed stricter suspension and delisting proceedings for companies that fail to meet its standards.
In an equity context, regulatory authorities are also focused on finding the right balance between shareholder oversight and managerial discretion.
Reforms in markets including Japan and Singapore aim to tilt the scales in favor of investors, including by giving them enhanced voting rights and introducing measures to increase transparency.
In the U.S. however, securities regulators are moving in the opposite direction, with recent policy measures favoring corporate management over proxy advisers and large passive asset managers. Reforms introduced by the federal government and the Securities and Exchange Commission (SEC) for example include allowing companies to adopt an opt-in system that permits certain shareholders to provide a standing instruction to automatically vote their shares in line with a board's recommendation, and to revise organizational documents to block investors from launching class-action lawsuits.
The ESG and sustainable financing landscape has also become more complex and politically contested as a result of the anti-ESG political backlash in the United States and the divergence between U.S. and European regulatory approaches to sustainability, among other things.
Sustainable finance remains a significant and growing pool of capital, but accessing it comes with more challenging disclosure obligations, heightened litigation risk and the need to navigate a patchwork of standards and expectations that vary across jurisdictions and investor bases. (We explore the diverging regulatory environment around sustainability in more detail here).
What do these forces mean for boards?
For corporate boards, these forces—the movement of capital into private credit markets, the rise of multi-strategy asset managers, financial innovation and global legal and regulatory reforms—raise a range of issues that require careful consideration.
More options, but added complexities
One of the primary consequences is that companies now have a much more diverse and flexible array of financing solutions available to them. The choice between raising capital on the public or private markets is no longer binary, and as a result businesses must consider carefully how to position themselves to access capital across the full spectrum of facilities and investor groups, and to understand the wider impact of different instruments on the way they operate.
Imperative to integrate economic, political and legal analysis into financing decisions
The global economic and policy environment creates additional complexity. The intersection of geopolitics, industrial policy and diverging regulatory regimes means that structuring and executing financing transactions requires a more integrated assessment of economic, legal, regulatory and political factors than ever before.
Governments are competing to onshore foreign investment within their borders while simultaneously restricting its outbound capital flows to other jurisdictions in sensitive sectors, as well as managing the risks that come with deeper, more complex and more interconnected capital pools. What might be an optimal financing structure from a commercial perspective may be constrained by the policy environment in which it operates.
Understanding the impact on M&A processes
The convergence of public and private capital is also reshaping the M&A landscape. Multi-strategy private asset managers are no longer simply competing with strategic acquirers for assets; they are increasingly co-investors, financing partners and counterparties in complex carve-outs, joint ventures and consortium deals. For any multinational with an active M&A agenda, understanding the incentives, timelines, and governance expectations of financial sponsors is essential—not just when going up against them for targets, but when partnering with them on coinvestment opportunities.
Narrowing governance gap between public and private companies
Private capital limited partners are demanding greater transparency from their fund managers (who in turn are placing similar demands on their investee companies), ESG frameworks are extending disclosure expectations into private markets, and regulators in several jurisdictions are considering whether private market participants should be subject to more rigorous reporting obligations. As a result, the governance distinction between public and private companies is narrowing.
The importance of stakeholder engagement
There is also a people dimension to these market shifts. Companies that have historically engaged primarily with public market equity investors, sell-side analysts and syndicated lending banks now find themselves sitting across the table from private equity sponsors, direct lenders, sovereign wealth funds and representatives from family offices.
These counterparties have different investment horizons, disclosure and transparency expectations and approaches to governance. Building the internal capability to effectively manage these relationships is a practical and immediate priority for multinationals seeking to take advantage of the evolving capital markets landscape.
New risks from market convergence
The convergence of public and private markets introduces new risks that boards need to actively monitor and requires that business leaders understand who ultimately owns their credit risk.
At the same time, private markets are still fundamentally less liquid than public ones, and the structures designed to bridge this gap—semi-liquid fund vehicles, secondary platforms, NAV facilities—have not been fully tested in a period of sustained, severe market stress.
The rapid expansion of private capital has attracted increasing regulatory attention: the SEC, the UK Financial Conduct Authority, the European Securities and Markets Authority and other supervisors are scrutinizing the potential impact on systemic risk and investor protection across private markets, meaning the regulatory environment could shift as a result.
And as recent events have demonstrated—from geopolitical shocks in the Middle East to fears about a potential AI investment bubble and emerging concerns in the private credit space—external developments can rapidly alter the availability and cost of capital, underscoring the importance of stress-testing capital structures against a range of scenarios.
For multinational businesses operating in this landscape, the imperative is clear. Capital strategy can no longer be siloed between public and private, or debt and equity, and capital raising decisions now require strategic consideration of geopolitical factors and governance impact. Boards that build these integrated capabilities will be best positioned to establish capital strategies that can improve their resilience in volatile, uncertain times, and to seize the opportunities as well as manage the risks of a more complex and interconnected funding landscape.
