Quarterly Outlook, Second Quarter 2026

The quarter closed with an argument still unsettled. How much of the return earned in private markets since 2010 was underwriting skill, and how much was the mechanical effect of discount rates falling for a generation? The question is no longer academic. One of those two engines has been switched off, and the funds raised in the vintages either side of 2021 are now being asked to produce their returns without it.

Rates

Policy rates across the United States and the euro area have settled at levels that would have appeared unremarkable at any point before 2009. They look restrictive only against the interval that followed. Sapna Ventures' working assumption for underwriting purposes is that the real cost of capital stays broadly where it is, and that any model requiring a return to 2015 conditions in order to clear its hurdle should be treated as a wager on monetary policy as opposed to an investment in a business.

Term premia have re-established themselves at the long end. For families holding sovereign paper, that is the first time in many years that duration has been paid for properly. Sapna Ventures has extended maturities on the reserve portfolios accordingly.

The Distribution Drought

Capital returned by private equity funds has trailed capital called for several consecutive years now. Families experience this as a portfolio that reports well and produces nothing to spend, which is a difficult thing to explain to a beneficiary whose annual draw was supposed to come out of it.

The consequence is visible in the secondaries market, where volume has risen substantially and where a large share of transactions are now initiated by general partners in lieu of limited partners seeking the door. Continuation vehicles have become the default answer to an asset a manager cannot sell at the price it is carried at.

The firm has been a buyer in this market and expects to remain one, with a reservation worth stating plainly. Where the same manager sets the price, selects the assets and stands on both sides of the transaction, the alignment problem is not solved by a fairness opinion. Positions have been taken only where an unaffiliated party led the pricing and where the underlying asset was one Sapna Ventures would have been content to underwrite from scratch.

The Gulf

Capital continues to arrive in the Emirates faster than it can sensibly be deployed. That is an excellent condition for the jurisdiction and an awkward one for the allocator, because the first assets to be bid up are always the ones easiest to buy. Prime Dubai residential, the larger listed names and the more visible private placements have all repriced on the strength of inflows in preference of any change in what they earn.

Supply in Dubai residential is the number to watch over the coming eighteen months, with ~134,000 units scheduled for handover against absorption running at roughly 66%. The firm has taken no new development exposure in the emirate this quarter and has rotated the existing allocation towards income-producing assets on longer leases.

Positioning Through the Quarter

The liquidity reserve was raised, on the view that the most valuable thing an allocator can hold in a market with a distribution problem is the ability to buy from somebody who has one.

Private credit exposure was added at the senior end of the capital structure and reduced in the subordinated tranches, where spreads no longer compensate for the position in the waterfall.

Venture pacing was slowed. Entry pricing in the areas that Sapna Ventures covers has not adjusted to the exit environment, and committing at these levels requires an assumption about terminal multiples the firm is unwilling to make.

Currency hedging was extended for families whose spending is denominated away from the dollar.