CIO OUTLOOK Looking ahead to 2027

The transition from efficiency to resilience is creating a reflationary investment cycle dominated by Defence, Decarbonisation, Digitalisation and Deglobalisation, favouring selective credit, European sovereignty and asset-intensive private equity.

• Companies are rebuilding inventories, production capacity and strategic reserves after the COVID-19 pandemic and geopolitical tensions, while this resilience investment is financed by public debt and private capital; in artificial intelligence, infrastructure is mainly funded by private capital, and Google made the largest capital raise in history for a listed company in 2026.
• Deglobalisation, fiscal expansion, restrictive immigration policies and AI-related demand for electronic components, electricity and water are expected to sustain inflation, while the recent appreciation of the RMB reduces a previous deflationary offset; Tikehau therefore considers long-term interest rates still too low and expects yield curves to steepen.
• The authors expect equity returns to rely more on earnings growth than on multiple expansion or refinancing, while remaining positive but selective on credit; they favour floating-rate private debt, liquid short-duration credit and subordinated financial bonds, and prefer credit risk to duration risk.
• The environment is compared with the sustained reflation of the 1970s rather than the deflationary 2008 crisis, making valuation discipline and a margin of safety important; despite substantial 2026 flows into highly valued sectors and asset classes, the authors identify European sovereignty, decarbonisation, defence, real estate and European private debt as opportunity areas.
• Private equity must adapt to more asset-intensive businesses, where return on invested capital and cash-flow allocation matter more than EBITDA growth alone; leverage and multiple expansion should be constrained, and Tikehau reports average leverage of approximately 3.5x EBITDA versus approximately 5.2x for European sponsor-backed LBO transactions.
• Decarbonisation is framed as an issue of energy independence and sovereignty: China had 58 nuclear reactors operating and 37 under construction in 2026, while its high-speed rail network reached 50,000 kilometres and served 97% of cities with more than 500,000 inhabitants.

Takeaway: Investors should prepare for a longer-lasting reflationary cycle by reducing reliance on duration and valuation expansion, prioritising selective credit, real assets and resilience-related growth, while recognising that higher rates, capital-allocation risk and weaker growth will increase dispersion.