Liquidity And Exit Constraints Driving Secondaries And Future Outlook
Sources: 1 • Confidence: Medium • Updated: 2026-03-08 21:18
Key takeaways
- A key current debate is whether private equity can continue to generate alpha, given extended holding periods and uncertainty about liquidity and exits.
- Clients are described as having strong interest in investing in AI opportunities in private markets while also being concerned that AI will disintermediate and disrupt traditional software investing.
- The investable set categorized as alternatives is described as expanding and shifting over time to include items like precious metals, crypto, and farmland depending on market context and access.
- Over the last five years, the average private equity portfolio barely outperformed global equity markets, while top-quartile and second-quartile managers delivered about 600+ basis points of alpha over global equities.
- Client interest in Asia is described as rising notably around Japan as an investment destination.
Sections
Liquidity And Exit Constraints Driving Secondaries And Future Outlook
- A key current debate is whether private equity can continue to generate alpha, given extended holding periods and uncertainty about liquidity and exits.
- Secondary private equity strategies have seen increased client allocations because they can provide liquidity solutions as managers hold assets longer and LPs seek exits.
- Last year is described as having a large increase in exits by dollar volume but not by deal count, with deal count down and activity dominated by larger transactions.
- A key 2026 focus is described as renewed capital markets activity that enables more exits and distributions for alternatives investors who have been waiting on liquidity.
- Many private market firms are described as sitting on substantial dry powder and expected to increase deployment if deal activity improves in 2026.
- Alternatives fundraising has been challenging in recent years partly because private equity distributions have been slower, making it harder for firms to return to market for new fundraising.
Ai As Dual Driver In Private Investing And Operating Model Risk
- Clients are described as having strong interest in investing in AI opportunities in private markets while also being concerned that AI will disintermediate and disrupt traditional software investing.
- Goldman is described as actively evaluating how to apply AI internally for efficiency under a firmwide 'one GS' approach.
- AI is described as being able to automate many entry-level finance tasks much faster, while creating a training pipeline risk because junior staff may not develop skills needed to review work and become senior decision-makers.
- Infrastructure has seen a pickup in LP interest, in part due to technology-driven needs such as data centers and higher power demand associated with AI.
- AI-driven infrastructure needs are described as catalyzing new growth vectors for infrastructure investing.
- Investor interest is elevated in venture and growth strategies as investors seek exposure to AI-driven innovation through private markets and managers with strong access and underwriting ability.
Retailization Of Alternatives And Distribution Enablement
- The investable set categorized as alternatives is described as expanding and shifting over time to include items like precious metals, crypto, and farmland depending on market context and access.
- Goldman has launched GS Investment University to provide alternatives education to advisors and clients.
- Over the last 5–10 years, alternatives have shifted from being primarily institution-owned to increasingly including a broader base of individual investors.
- As institutions largely reached long-run alternatives allocation targets, institutional incremental growth slowed and alternative managers sought new capital sources such as individual investors.
- For wealth clients, the core of private-market exposure remains fund-based rather than single deals, though there is strong appetite for late-stage private technology names via primary rounds and secondaries.
Dispersion And Selection Intensity In Private Markets
- Over the last five years, the average private equity portfolio barely outperformed global equity markets, while top-quartile and second-quartile managers delivered about 600+ basis points of alpha over global equities.
- Goldman’s alternatives approach emphasizes diversification across strategy, manager, and vintage year, with ongoing yearly commitments in closed-end funds to build a diversified core.
- Goldman’s external alternatives investing group is described as having 400+ people, meeting nearly 700 managers per year, and investing in a core private equity manager portfolio of fewer than 10 managers annually.
- Private credit is described as a larger market than private equity.
- Goldman expects greater dispersion of returns among private credit managers, increasing the importance of selecting cycle-tested managers with high-quality underwriting.
Geographic Positioning And Regime Sensitive Preferences
- Client interest in Asia is described as rising notably around Japan as an investment destination.
- Goldman and its clients are described as marginally underweight China, with client reticence influenced by U.S.-China relations.
- Goldman Sachs has had a bias toward U.S. investing in recent years due to perceived strong growth and resiliency in the U.S. economy while still running sizable investing businesses in Europe and Asia.
- Goldman is described as seeing growing opportunity in Europe, especially in private equity, and increasing focus there.
Watchlist
- A main structural concern described is the growth of evergreen or perpetual alternative vehicles offering quarterly liquidity that is subject to gates.
- It is unclear how individual investors will react when gating occurs in evergreen alternative vehicles.
- The investable set categorized as alternatives is described as expanding and shifting over time to include items like precious metals, crypto, and farmland depending on market context and access.
- Client interest in Asia is described as rising notably around Japan as an investment destination.
- Clients are described as having strong interest in investing in AI opportunities in private markets while also being concerned that AI will disintermediate and disrupt traditional software investing.
- Goldman is described as actively evaluating how to apply AI internally for efficiency under a firmwide 'one GS' approach.
Unknowns
- What independent data verifies the stated scale metrics (alternatives AUM, diligence funnel counts, and private credit vs private equity market size)?
- How large is the evergreen/perpetual vehicle segment, how fast is it growing, and what are the actual contractual redemption limits and gating terms across major vehicles?
- How have redemption requests, gating frequency, and secondary-market discounts behaved for evergreen alternative vehicles during stress events, and how sensitive are flows to headlines?
- What benchmark definitions and datasets support the claim about average private equity performance versus public global equities and the stated quartile alpha magnitude over the last five years?
- Will capital markets activity in 2026 actually broaden beyond large transactions to enable mid-market exits and widespread distributions?