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 Luxembourg, 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. Luxembourg’s respondents in the survey were the most bullish in Europe on this trend: 65 percent of them say that at least half of private markets fundraising will come through such products in as little as two years’ time.

Several developments could help unlock growth in retail-style products. Product innovation is key, with an unusually high proportion of Luxembourg institutions (70 percent) citing developments in the semi-liquid fund space as being a key driver that could make private markets investing more accessible for investors in defined contribution schemes.

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 60 percent of institutions in Luxembourg increasing their private equity allocations as a strategy to enhance diversification.

The emphasis on quality can also be seen in a shift in capital allocation plans from emerging to developed markets. Developed Europe saw a significant jump in interest since last year’s survey, with 63 percent of limited partners (LPs) now planning investments in this region within the next two years (up from 43 percent in 2024). Institutions in Luxembourg are even more enthusiastic about developed Europe, with 73 percent of its LP respondents citing the region as a top focus for investment.

AI adoption in private markets: The AI revolution is already underway, and institutions in Luxembourg are moving faster than their peers in many other countries. The vast majority (90 percent) of its respondents recognise the opportunity to use GenAI-based large language models to make better use of their unstructured information.

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.