YouSaid · the spoken record

Pete

lines on the record: 28
first: 2026-06-10
most recent: 2026-06-10
sittings or episodes: 1
sources: podcast

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“The other thing else that I might add to what Mike has said, if you take a look at the industry, it's been a large industry that's been around for 50 years plus minus, depending on how far back you want to go, it's consolidating because it's maturing. What you're seeing is a very barbelled-like structure. You've got the big multi-line, largely public asset managers across various strategies. And then you've got the more discrete strategies that have excelled really based on the performance and the alpha they've created. We think that market structure can persist. The question is, A, the existential question is your funding model. How do you fund yourself retail, institutional, and how does that mix change over time? And B, where do all those folks in the middle of that barbell wind up? And some of them will continue and persist and continue to scale. Some of them will be more monochromatic, if you will, in terms of their approach to the market. But right now, we believe we're at that inflection point A in the market. So you're seeing this liquidity and DPI problem starting to get cured. But more holistically, what's going on in the industry we think is faster.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Some period of normalcy here, if we can have an op ramp from the war and return to normal times, which we will at some point, you are going to have that confidence building time. And we think that within two to three years, you could be seeing distribution environments and deal activities that are even above what you saw in 2021, which is the prior top tick of the market. So I think we are cautious sitting here today because of what we see happening in the world. But there is an underlying optimism that we feel about this market despite some of the challenges we're seeing, that there are probably some pretty good years ahead of us here.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, we are at an inflection point, and while it is a pretty unpredictable world right now, given what's happening in geopolitics, we're worried about inflation. There are things in the backdrop to be concerned about into whey, surely. That all being said, a lot of the ingredients are there, right? The capital markets are very much open right now. And at least if you look at the last couple weeks, they are pretty risk on right now. You could have some very large IPOs over the course of 2026. Sponsors are ready to transact, right? Despite what's going on in private credit, there is private credit available for the right types of deals. And so you need to climb that wall of worry. I mean, that's what the M&A market is really about in private markets is getting that confidence back that once you launch a sales process, it's actually going to go through to fruition. But I think that confidence, if we can have”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“It but as I alluded to earlier, credit as an asset class will continue to be very durable and one that we'll recommend to our clients, but obviously the underlying structures are important for them to understand.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Becomes a private credit versus a public credit over time as private credit becomes traded and more liquid. But right now, the retail participation of those vehicles has ebbed, not surprisingly, because when investors want their liquidity, it's not fully available on the day they want it. And so I think that is now better understood, as Mike alluded to, I think that was broadly in education point rather than was a feature of these funds to be illiquid and to have these gates. But I don't think that was well understood enough and that's why we've had a lot of the press around it. But as you look at the broad credit cycle right now, if you look at portfolio quality, if you look at default rates, if you look at pick rates, all the key things that people look to in terms of the underlying performance, it's actually quite good. Doesn't mean to say we can't have a credit cycle. It doesn't mean to say that if inflation kicks in and the war in the Middle East continues and what have you, that there will be more credit defaults. Of course there will be. That is a feature of credit, not public credit versus institutional credit. It's just a feature of credit.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, if you look back over the last five, six years, retail participation in private credit has compounded every year 60%. And it's right now about 20% of the private credit market is held in writ large and retail. And that was fine until there was a liquidity mismatch between those who were the investors in the funds and those who managed the funds. And part of that, as I alluded to earlier, is a conflation in the press between what is actually a systemic credit problem and what is not. And we don't believe that there's a systemic credit problem in the private credit industry or in credit generally right now because of the performance in the economy. But I do think that, as Mike alluded to, it's important that the investors understand the nature of the underlying vehicles that they're invested in, i.e. if there's a 5% liquidity provision, there's a reason for that because these assets are liquid. They're supposed to be illiquid. Now, there is a burgeoning private credit trading aspect coming into the market, so it'll be interesting to see what...”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“We are working with other firms on what they're doing in the evergreen space. But this is a trend, notwithstanding what's happening in private credit that we believe is going to continue over the next decade and probably decades.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Big as $500 billion. So there are other forms of liquidity, and this is a very creative market. It does evolve quickly and new solutions come up. This is a great example where we're seeing more and more instruments come up that are creating liquidity for investors in markets. The third thing I would say that's going to continue to grow is retail. So if you look at these returns, if you look at what I'm talking about, what's happening in the innovation economy, I think a lot of people are saying, should we prevent all retails except for the wealthiest investors from participating in these different premia that you see in these markets? I think a lot of people are saying, no, we should democratize that. We should open that up to more people. We agree with that with a big but. There need to be guardrails. There need to be education. And so we are fans of opening up access to alternatives. We are providing solutions to our own investors.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“So, I think there's a couple of areas that I would highlight. Number one is So, in other words, if you go back to that period of time, you couldn't raise more than $54 million in the private markets. Now you've got people raising tens of billions of dollars. So the only reason that you're really going to go public in most cases is because you need to provide monetization to your early investors and to your employees. And so that means that most of the innovation out there in terms of new companies is going to live in the private markets. I don't see that changing, honestly. And that's a trend that has long-term legs. That's number one. Number two, other forms of liquidity have really become much, much more important in today's market. Pete talked a little bit about hybrid capital and different forms of financing, but the secondary market has become really big over a period of time. It was about $250 billion last year. We estimate that over the next three to five years, the secondary market could be”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“I think a way of summarizing some of this conversation is to say that actually alpha is cyclical in the private markets, and that's because private equity is a levered asset class. It is pro-cyclical. So that is an underlying fact of private markets. But you also have, as Pete said, a lot of volatility and variability in public market returns over time. And so you do tend to see this. Now, when you look over that 25 or 30 year period of time that I referenced, it tends to even itself out. And I think most academics would say if you're getting one to one and a half points of an illiquidity premium, that's very much worth it. for a portfolio that's diversified across assets.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Public markets vis- ⁇-vis the private markets. Right. But as an investor, shouldn't you be paid more overtime in the private markets because they're less liquid? You should be receiving an illiquidity premium, shouldn't you? Yeah, that's right. And Mike, you've probably measured the data more specifically, but historically some of”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“More normal return environment, so 0 to 10, and you see a lot of private equity outperformance, dramatic outperformance when public markets are negative. And so we're confident that over time, I mean, last two years, one of the reasons why private equity doesn't look so great is public markets were up between 40 and 50 percent over that period of time. The marks are smoothed over time. And as you see things normalize, we're confident that alpha is going to be back in the historic ranges where we've seen it.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, we're getting this question a lot these days. I even get it sometimes at cocktail parties. Should I still be having this allocation to private equity? And as a matter of fact, when you look at three-year rolling returns, private equity has actually gone negative in terms of alpha to the public markets for the first time over the last two years. And so just to explain what we do is we take a portfolio of private assets and public assets and we match up the buy and the sell dates to determine what is the direct alpha of holding a private equity portfolio. What we did is we looked at periods of return when returns in the public markets were negative when they were 0 to 10% and when they were 10% and above. And what you tend to see because of the marking convention at private equity tends to be more smoothed over time is private equity is roughly flat when public markets are up more than 10%. And you see a lot of the alpha in”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“But as you said earlier, Mike, you've got these private markets, we have reason to believe that there's going to be more normalization ahead. But at the end of the day, the public markets are accelerating very dramatically, as you said. New highs, new highs, new highs. So why private market versus public market in that context?”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“The one thing I would add to that is we have a strong bias toward GPs that add a lot of value. And so as Pete said, I wouldn't underestimate GPs because it's been a difficult time. They've had to contend with a difficult geopolitical and economic backdrop. But the capability to add value to these companies, the magic of private equity is you have concentrated ownership among an ownership group that has deep domain expertise and operating expertise. So they have not been sitting on their hands. They've been doing a lot with these assets. And we think that they're going to drive value over time.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“But it's going to be over a period of time. This is not going to be an overnight sensation, but right now we have a very constructive macro backdrop. And surprise, surprise, the sponsors are running into it. So I would not underestimate their ability to create liquidity events for their limited partners.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“But there's also a lot of liquidity on the buy side ready to invest in their companies. We have a functioning IPO market now. We have a leveraged buyout market that's been incredibly slow. There hasn't been a lot of supply because of this mismatch between”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Side MA and IPOs. Those are still readily available, but you think about the liquidity spectrum, whether it's NAV-based lending, whether it's cash flow-based lending against the GP, whether it's secondaries, whether it's structured transactions.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Right. And of course, the pressure on rates, which has not been what we all expected to see at least this point, because as you said, primarily because of the war. But when we think about how the sponsors are actually dealing with some of this and some things going in the right direction and some things not going as well as I think we had expected, how are you seeing them adjust? Are they putting more equity? Are they getting more creative about their structures? Are they just walking away from deals? Or is it just wait and see? Maybe I'll take a swig at that, Allison and Mike, you could jump.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Equity portfolios were worth less, but the marks were slow to come down. What's happened to change that? A couple things have happened. The economy's been strong, so we've had three to four years of economic growth. That means the underlying operating earnings of these companies have”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“So let's talk about why we are in this period of indigestion right now. Why is this circulatory system not working? It's relatively simple, and it just goes back to the math of private equity. If you go back to 2022 after that period of massive growth, what happened? The economy didn't go into recession. Capital markets were open. There was plenty of dry powder. Pete said on average, about 20% of market value realizes on average every year. So why have we been stuck down at 8, 9, 10 percent over the last three years? Well, the reason is relatively simple. The Fed increased rates by roughly 500 basis points in private market portfolios weren't really marked down that much. And so if you do the math, remember this is a levered asset class where usually you take about one part of equity and one part of debt to finance the buyout of a company. If that debt gets a lot more expensive, that asset is actually worth less. And so the price”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Right. So we are not particularly worried about private credit as an asset class, but let's talk a little bit more and dig in on that private equity side bike. So what will be the catalyst, not for a tsunami, but to see normalization in that area”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“And investment gains that were driven by lifts in multiples. And now we have a market that's elongated. And we think what's happening is things are really going to return to historical norms as it relates to holding periods. Call it six, seven years. And if you look at distributions as a percent of in the ground nav, those have been historically low. Mike and I will go through those. But we think those will return to normalized levels of 15 to 20 percent. But it's going to take some time. And I think AI is going to be a big factor in the context of all that and how that plays out both upside and downside across portfolios is being discussed today. But I think if you look at equity monetizations on the private equity side of things, it's been slower, but we're starting to see the waves lap up on the beach with higher frequency now. We don't think there's going to be tsunami of distributions. We think it's going to be more consistent as the market continues to perform. But that's a big if, right?”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Credit holistically is a very solid asset class. And if you look back to the GFC and prior business cycles, you had default rates exceeding 10%. Today, they're at 2% or below depending on what subcategory of private credit you're looking at. And even in a very stressed scenario where you had 50% plus of private credit underperforming, if you look at that over history in a 10% default rate, you still have only got 5% of losses versus an up to top to bottom and a peak to trophy equity market was over 50% during that same period. So private credit is a very resilient asset class. And I think there are aspects of it, as Mike alluded to, that will go under pressure as the economy strains a bit if that does happen. Right now we're in a pretty resilient period. But we think it's a good asset class to be in and that will persist. And then if you look at private equity, as Mike said, we're a little bit of an indigestion period, if you will. We've had the luxury over prior cycles of much shorter hold periods.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“So maybe I'll build a little bit Alison on what Mike has said, even taking a further step back. I think we're in the middle of a market structure change, just like we had in public equity domain where we had decimalization of equities and ETFs of equities and increased liquidity across the curve, we have a situation here in alternatives where market structures are evolving very quickly. And I think to your question, we are at an inflection point. I think if you look at private credit, for example, it's been much maligned in the press and certain aspects of it. But if you look at any historical averages in terms of defaults and underperformance in private credit, we're really nowhere close to even those averages, either in private credit or in public credit. And there are certain aspects of private credit, whether it's in software-centric companies or companies that were over-levered coming out of the 21, 22 LBO period that are a bit softer in performance, but really private”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“Is 14 years, right? It's a long period, and these are for the big winners, the companies in the Republic. In private equity, it was five and a half years just going back maybe five and ten years ago. Now the average buyout is being held for almost seven years. So the system is gummed up, the circulatory system is not working. And so that's making fundraising harder. It's driving consolidation. It's driving a lot of change in the industry. So we are definitely an inflection point. And I haven't even touched on what's going on in private credit.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“But there's a lot of questions What is going to happen to that exposure? So that's number one. Number two is private markets have been doing great over that period of time, but public markets have been absolutely ripping, particularly in the last two years. And so people are asking the question, gosh, is the illiquidity premium there? Is it worth it to be investing in private equity when I can just invest in public markets? So that's another question that I'm sure we'll get into. And then finally, we talked about the cracks, the distributions. Distributions are sort of a circulatory system, a private equity. It's the way that the whole things work. You lock up your money on average. You think that in five to six years, you're going to get your money back with a multiple. Maybe it's going to be one and a half, maybe it's going to be two, maybe it's going to be three times. Or in some cases, more or less. But the average time of holding companies has gone up a lot. The average time to IPO for venture company right now”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT
“We are at a big inflection point right now, and there's certainly a lot of stuff going on. But first, let me put it into context. So if you look between 2010, right after the GFC, right through 2022, when the Fed increased interest rates, you had a period of unprecedented growth in private markets. Private markets actually over that period of time were up six times. So just a massive period of growth. then the Fed increased interest rates and everything came to a halt. And so as we sit here today, now four years later, there are these big questions that are looming over the market. Number one is AI. AI is changing everything in the investing world, as we talk about often on this podcast. In private markets, that's definitely true. Some of that is the big investments that are being made in AI and a lot of the opportunities around it and how much of private equity is invested in software over the last period of time. It's about 30%.”
2026-06-10 · Goldman Sachs Exchanges · Private Markets at an Inflection Point · IDENTIFIED FROM THE TRANSCRIPT