Francisco da Cunha (Deloitte): The new rules of capital allocation

Francisco da Cunha, Investment Management & Private Markets Leader at Deloitte Luxembourg, explains how the rules of the game have changed and what this means for capital allocation today.

How have the rules of the game changed in investment management and private markets?

The rules have changed because general partners (GPs) can no longer rely mainly on leverage and multiple expansion to generate returns. In today’s macroeconomic environment, they may need to deliver around 12% annual EBITDA growth to achieve returns that previously required only 5%. This shift places much greater emphasis on operational execution and genuine value creation. It also reshapes sector priorities, as managers increasingly target areas with structural, visible demand, including energy infrastructure, digital networks, defense capacity, and healthcare systems. In other words, managers are moving away from financial engineering and investing in the “rewiring” of the global economy. Technology is also reshaping the market. Investors continue to shift from active UCITS strategies toward ETFs, while tokenized funds and digital fund infrastructure move from concept to practical application. Across public and private markets, scale, specialized capabilities, and disciplined execution now matter far more than access to cheap capital.

Managers are investing in the ‘rewiring’ of the global economy.

How are these changes reshaping capital allocation today?

Investors are directing capital toward strategies that combine structural growth with active value creation. The clearest example is the A.I.–infrastructure–energy nexus. Data center fundraising doubled in 2025 to more than $100 billion, but the larger opportunity may lie upstream in grid upgrades, substations, on-site power, water and cooling systems, and fiber interconnection. Europe’s reindustrialization, higher defense spending, supply-chain nearshoring, and push for energy sovereignty reinforce this allocation trend. Investors are also shifting capital geographically. According to Preqin, the share of real estate investors reallocating capital from the US to Western Europe rose from 24% to 45% in one year, while Central and Eastern Europe continues to gain credibility. However, investors remain selective, as valuation, power availability, concentration, and execution risk increasingly shape deployment decisions.

What does this mean for Luxembourg, and how should managers and investors adapt?

Luxembourg can turn these themes into investable cross-border products. As the EU’s leading domicile for AIFs, with established UCITS and ELTIF 2.0 capabilities, the country combines capital formation, regulatory expertise, and global distribution. For managers, the key question is not whether to use Luxembourg, but which vehicle and structuring layer best suit the strategy, investor base, and liquidity profile. Luxembourg provides a particularly strong platform for infrastructure, private debt, and semi-liquid solutions linked to Europe’s energy, digital, and industrial transition. Managers and investors will nevertheless need to adapt. GPs should build integrated, automated, and data-driven operating models; strengthen valuation and liquidity governance; and carefully manage risks related to power access and concentration. Limited partners, in turn, demand stronger governance and timelier, data-driven input from GPs as continuation vehicles, secondaries, and fund-of-funds structures expand. Managers should also include tokenization and digital fund infrastructure in their feature on near-term implementation roadmaps, as both are becoming part of the market’s operating reality.