Private markets insights from HarbourVest Partners.

HarbourVest examines payment-in-kind (PIK) structures in private credit, distinguishing between productive PIK - used opportunistically in junior credit to fund high-ROI investments - and problematic PIK, which often masks cash flow stress in senior secured loans. The piece provides a practical framework for evaluating PIK across purpose, leverage, structure, sponsor alignment, and market context, arguing that disciplined PIK usage can enhance MOIC, diversify fixed/floating rate exposure, and generate alpha.

HarbourVest argues that floating rate assets offer a strategic complement to traditional fixed income by providing low duration exposure, inflation resilience, and improved equity diversification in the current environment of elevated rate volatility and a steepening yield curve. The piece makes the case for blending fixed and floating rate instruments, highlighting structural pressures on long-duration bonds and the disconnect between market rate-cut expectations and Fed projections.

HarbourVest outlines three structural advantages of direct co-investing within evergreen private equity structures: scalable selectivity (reviewing 1,000+ deals annually with a sub-10% acceptance rate), cost efficiency from low/no-fee structures, and intentional portfolio construction. The piece also highlights how deal-by-deal transparency enables targeted exposure to AI-aligned software businesses amid widening outcome dispersion.

HarbourVest uses 15 years of Preqin and proprietary performance data to demonstrate that private infrastructure allocations of 10 - 30% improve Sharpe ratios, reduce volatility, and enhance returns in private markets portfolios. The piece further argues that infrastructure secondaries offer additional risk-adjusted advantages through shorter duration, improved capital efficiency, and reduced blind pool risk.

HarbourVest argues that geopolitical fragmentation and the assertion of state control over technology, energy, and capital flows have made sovereignty a first-order underwriting variable for private market investors. The piece provides a regional SWOT analysis (US, Europe, China) and sector-level takeaways on how investors must reframe portfolio construction, exit risk, and cost of capital in a world of managed deglobalization.