In the first quarter of 2026, alternative investments (“alternatives”) on average had solid positive returns and even better relative returns as capital markets struggled around the globe, especially U.S. equities. Investor focus shifted from “AI” (Artificial Intelligence) to the war with Iran. As a result of the conflict, commodity volatility spiked dramatically and most prices soared. Not surprisingly commodities dominated asset returns, with energy up nearly 60%, while industrials, precious metals and agricultural sectors outpaced most other asset classes. Private equity and private credit markets, which have been all the rage these past couple of years, were a bit more in the spotlight during the quarter, and not in a positive way. Some high-profile private credit funds have had to invoke gating on their redemptions as investors sought liquidity from their portfolios. Equity valuations have come down but remain quite elevated from a historical perspective. Valuations at these levels would typically prompt caution in the best of macro-environments, and given the highly volatility geopolitical environment, they may represent a heightened vulnerability for investors.

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