Pimco CEO Warns Private Markets May Be Unprepared for a True Recession Test

Emmanuel “Manny” Roman, CEO of global investment giant Pimco, has raised concerns that private markets may not be fully prepared for the shock of a full-scale economic downturn, emphasizing the need for rigorous risk management as financial conditions tighten.

Pimco, which currently manages $2.1 trillion in assets, has invested over $200 billion in alternative assets. While private equity, private credit, and real estate have surged in popularity in recent years, Roman believes these asset classes have yet to be “battle-tested” in a deep recession.

A Market Yet to Face Real Economic Turbulence

“We haven’t seen a truly severe recession since the global financial crisis,” Roman said. “Yes, markets were volatile during COVID, but they were quickly stabilized by massive government stimulus.”

He cautioned that the current scale of the private market boom comes with significant hidden risks, especially as asset managers increasingly open access to illiquid investments for retail investors—raising questions about suitability and liquidity under stress.

Infrastructure and AI Boom Driving Capital Demand

Roman highlighted soaring capital needs in areas like data centers, energy transmission, and high-speed telecom infrastructure—particularly in the U.S. and U.K., where governments are rebuilding outdated systems to meet the demands of the AI era.

Pimco is reportedly raising funds for a Europe-based data center fund valued at over €1.4 billion, as well as a $4.2 billion asset-backed financing strategy, covering mortgage loans, auto loans, and more.

Asset Valuations and Growing Bubble Concerns

While private markets offer strong yield potential, some investors—including Pimco—have voiced concern that equity valuations may be entering “bubble territory”, fueled by over-optimism amid unresolved trade disputes and rising geopolitical risks.

“We focus on assets where we fully understand the downside risk,” Roman said. “Our strategy remains consistent: identify high-potential opportunities while maintaining disciplined risk control.”

Recession Scenarios and Fed Policy Expectations

Many investors expect that if a significant downturn materializes, the Federal Reserve will cut interest rates, reducing borrowing costs and easing pressure on private equity-backed firms. But Roman warns that recessions can take many forms—from regional slowdowns to global shocks—and all must be accounted for.

He referenced past market meltdowns including the 1980s S&L crisis, the dotcom bust of the early 2000s, and the 2008 financial crisis, noting:

“We never forget those lessons. As fixed-income managers, our nature is conservative. But at some point, an unforeseen event will test the market’s true tolerance for risk.”