Signs of thaw: LP and GP risk appetite is gradually returning

After a prolonged period of risk aversion, Walker & Dunlop Investment Partners (WDIP) is seeing early, but increasingly consistent, signals that risk appetite among both LPs and GPs is beginning to re-emerge. Capital allocators are engaging again. Deal conversations are happening earlier. While we’re still far from the pace of 2019 or even 2021, there’s a growing willingness to underwrite future upside, not just present stability.

This shift isn’t dramatic; it’s deliberate. It reflects a recognition that sitting on the sidelines indefinitely is itself a risk. Many LPs are asking: If I wait until conditions are perfect, will I have already missed the opportunity?

That’s creating a more nuanced market where capital is still selective, but not stagnant, and where creative structures and differentiated strategies are getting rewarded.

Fundraising remains tough, but capital is no longer frozen

Let’s be clear: this is still a highly challenging environment for raising equity. The bar is high, and the pool of active allocators remains relatively shallow. Many institutions are managing legacy commitments, vintage fatigue, or internal pacing issues. However, the freeze we saw in late 2022 and early 2023 is beginning to thaw.

We’re seeing more LPs engaging in meetings, requesting follow-ups, and focusing on specific themes. Particularly around private credit and preferred equity, there’s real traction. These vehicles offer the combination of yield, structural protection, and optionality that aligns with today’s risk-return expectations.

The takeaway? Capital hasn’t disappeared. It’s just become more discerning. Sponsors who can clearly articulate their edge and have proven they can navigate volatility are finding receptive audiences.

Equity scarcity is setting the terms of the cycle

What’s arguably more defining than selectivity is scarcity, particularly on the equity side. It’s not just that LPs are slow to move; it’s that there’s very little discretionary equity targeting ground-up development or heavy transitional assets.

That scarcity has created a power dynamic. If you're coming to the table with equity right now, you're in a position of strength. You can drive structure, influence terms, and unlock opportunities others simply can’t access.

At the same time, it’s forcing managers to get creative. We’re seeing more focus on structured capital, and more partnerships where capital plays both a defensive and offensive role in the stack.

Investment sales are picking up, and that matters more than it may seem

Transaction volume is one of the best indicators of market sentiment. When deals start getting done, it signals the beginning of price discovery. Once price discovery occurs, capital can get back to work.

Over the past few quarters, we’ve seen a modest but notable rebound in investment sales, particularly in the multifamily sector. While it’s not a wave, it’s a positive directional shift. Sellers are beginning to meet the market. Buyers are underwriting with more confidence. That’s leading to more actionable deal flow.

What WDIP finds most encouraging is not just the volume, but the nature of the deals. Many are recapitalizations, preferred equity restructures, or sponsor transitions. These aren’t just “easy wins.” They’re signs of capital stepping back into complexity.

What to watch heading into 2026

We expect the next 12–18 months to be defined by how investors respond to a few key signals:

• Increased conviction in macro stability: Clarity on interest rates and inflation could drive broader allocations into real assets.
• The return of programmatic capital: As comfort returns, so too will blind-pool strategies and repeat sponsor-LP relationships.
• Growth in credit and structured equity: Expect continued demand for vehicles that offer risk-adjusted yield with embedded downside protection.
• Expansion of the capital stack: Traditional LP/GP deals are being supplemented with hybrid capital, rescue capital, and opportunistic preferred structures.

At WDIP, these trends aren’t just ideas. They’re informing how we deploy capital and advise our partners. We’re seeing that the most active groups today are those willing to step into dislocation with discipline, and back operators who bring deep asset-level insight.

WDIP’s approach: creating clarity in complexity

We’ve always focused on complexity because that’s where value lives. Whether it’s structuring around legacy capital, underwriting path-to-stability scenarios, or finding pockets of mispriced risk, our edge comes from our ability to navigate what others overlook.

Today, that matters more than ever. The market is transitioning—not into a bull run, but into a rebalancing. In these periods, the best opportunities are rarely obvious.

For our clients and capital partners, our role is to serve as a guide through uncertainty, helping them move with confidence, deploy with purpose, and discover opportunities that others may miss.

There’s no question we’re still early in this recovery. But make no mistake: the cycle has turned. For those willing to act thoughtfully, the next chapter is already being written.

Connect with Walker & Dunlop Investment Partners to discuss your next opportunity.

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^{This article is for informational purposes only. Nothing herein is an offer or solicitation for the purchase or sale of any security and may not be relied upon in connection therewith. Private real estate investments involve risk of loss; past performance is not indicative of future results. WDIP investment strategies are available only to sophisticated accredited investors. Any opinions and forward-looking statements are that of the presenters are subject to change. Neither Walker & Dunlop nor WDIP are market-makers in securities.}