Product innovation and new technologies are accelerating the democratization of private markets, according to State Street’s new report, 2025 Private Markets Outlook: Driving success in volatile environments. The report reveals the biggest trends affecting institutional investors in Japan, drawing on our latest global survey of 480 investment firms.

We focus on three crucial themes, each of which has implications for the future of private equity, private credit, real estate and infrastructure.

The democratization of private markets: The survey highlights a shift toward retail-like products in private markets. Sixty-three percent of institutions in Japan say that at least half of private markets fundraising will come through such products in as little as two years’ time.

Several developments are necessary to unlock growth in the semi-liquid fund space. Product innovation in this area is vital, according to 50 percent of Japanese institutions. In addition, 60 percent of Japanese respondents said that relaxing liquidity requirements for underlying assets in retail and defined-contribution funds would be important to make private markets more accessible.

A focus on quality: The shift from quantity to quality is now entrenched in investment strategies. Private markets investments are seen as a way to manage risk, for example, with 42 percent of institutions in Japan increasing their private equity allocations because of concerns about poor returns from public markets.

The emphasis on quality can also be seen in a shift in capital allocation plans from emerging to developed markets. Developed Europe has become much more of an investment priority for most respondents in the survey compared with last year, but Japanese investors have a different set of priorities. Here, North America is cited as a top region for investment by 60 percent of institutions. In addition, developed APAC is also a priority for 50 percent of Japanese respondents.

AI adoption in private markets: The AI revolution is already underway. More than nine out of 10 (93 percent) Japanese institutions recognise the opportunity to use GenAI-based large language models to make better use of their unstructured information, the highest proportion of any market in the survey. And more than half (53 percent) are already using them or are investing in the ability to do so, putting them ahead of most of their peers.

The report goes on to explore why private markets are proving to be resilient at a time of increased market volatility and geopolitical uncertainty, as well as which private asset classes are most likely to benefit from the three trends outlined above.