Bank favours Bridgepoint and CVC while flagging downside risk to EQT earnings ahead of results.
Citi has reiterated its caution on European alternative asset managers, warning that a recovery in private markets could stall over the next 6 to 12 months.
The bank downgraded Partners Group, the Swiss investment manager, to neutral with a high-risk designation.
It also placed a negative catalyst watch on EQT, the Swedish buyout group, ahead of its results, citing downside to consensus estimates.
The warning follows a recent deep-dive report in which the bank first set out the risks facing the industry.
Citi's analysts argued that artificial intelligence disruption and geopolitical uncertainty could hold back activity, leaving growth below expectations and pushing valuation multiples structurally lower.
They said this thesis was already playing out and expressed low conviction that conditions would improve in the short term.
A rise in private credit defaults to 7% by the end of 2026 would reinforce the pressure, according to the note.
Most investors the bank had canvassed shared its cautious stance.
Despite that, global alternative managers trade on 20 times forecast 2027 fee-related earnings, well above previous trough levels of 15 times.
Citi said it remained selective, favouring managers with strong fundamentals and discounted valuations.
Its top picks are Bridgepoint Group PLC (LSE:BPT), the London-listed private equity firm, and CVC Capital (EURONEXT:CVC), the buyout group behind brands including Breitling.
Fee-related earnings, a measure of income from management fees rather than performance, are watched closely as a gauge of stability in the sector.
The bank said estimate and price target changes were set out in full in its report.