Liquidity Mismatch Exits And Secondaries
Sources: 1 • Confidence: Medium • Updated: 2026-04-11 17:10
Key takeaways
- A main structural concern is the growth of evergreen or perpetual alternative vehicles offering quarterly liquidity that is subject to gates, and it is unclear how individual investors will react when gating occurs.
- Clients have strong interest in investing in AI opportunities in private markets while also expressing concern that AI will disintermediate and disrupt traditional software investing.
- Goldman has launched GS Investment University to provide alternatives education to advisors and clients.
- A key current debate is whether private equity can continue to generate alpha, given extended holding periods and uncertainty about liquidity and exits.
- Client interest in Asia is notably rising around Japan as an investment destination.
Sections
Liquidity Mismatch Exits And Secondaries
- A main structural concern is the growth of evergreen or perpetual alternative vehicles offering quarterly liquidity that is subject to gates, and it is unclear how individual investors will react when gating occurs.
- Headlines and sentiment can trigger a 'rush to the door' dynamic that increases redemption pressure in evergreen private vehicles, even when funds can meet stated redemption limits.
- 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 saw 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 renewed capital markets activity that enables more exits and distributions for alternatives investors who have been waiting on liquidity.
- Many private market firms are sitting on substantial dry powder and are expected to increase deployment if deal activity improves in 2026.
Ai As A Demand Shock And A Business Model Risk
- Clients have strong interest in investing in AI opportunities in private markets while also expressing concern that AI will disintermediate and disrupt traditional software investing.
- Goldman is actively evaluating how to apply AI internally for efficiency under a firmwide 'one GS' approach.
- AI can automate many entry-level finance tasks much faster, but this creates a training pipeline risk because junior staff may not develop the 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 catalyzing new growth vectors for infrastructure investing.
- Current 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 And Distribution In Alternatives
- Goldman has launched GS Investment University to provide alternatives education to advisors and clients.
- Goldman Sachs manages over $600 billion in alternative investments AUM.
- 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 their long-run alternatives allocation targets, their incremental growth slowed, pushing alternative managers to seek 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.
Manager Dispersion And Selection As Primary Driver
- A key current debate is whether private equity can continue to generate alpha, given extended holding periods and uncertainty about liquidity and exits.
- Kristin Olson asserts that 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 ultimately investing in a core private equity manager portfolio of fewer than 10 managers annually.
- Goldman expects greater dispersion of returns among private credit managers ahead, increasing the importance of selecting cycle-tested managers with high-quality underwriting.
Geographic Positioning And Client Demand Shifts
- Client interest in Asia is notably rising around Japan as an investment destination.
- Goldman and its clients have been 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 seeing growing opportunity in Europe, especially in private equity, and is increasing focus there.
Watchlist
- A main structural concern is the growth of evergreen or perpetual alternative vehicles offering quarterly liquidity that is subject to gates, and it is unclear how individual investors will react when gating occurs.
- The investable 'alternatives' set has been 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 notably rising around Japan as an investment destination.
- Clients have strong interest in investing in AI opportunities in private markets while also expressing concern that AI will disintermediate and disrupt traditional software investing.
- Goldman is actively evaluating how to apply AI internally for efficiency under a firmwide 'one GS' approach.
Unknowns
- What independent data sources and benchmark definitions support the stated private equity performance comparison versus global equities and the stated 600+ bps alpha for top/second quartile managers?
- How large are flows from individual investors into alternatives (absolute and as a share of fundraising), and how sensitive are those flows to market drawdowns and headlines?
- How frequently have evergreen alternative vehicles gated redemptions, what were the triggers, and what were subsequent investor behaviors (additional redemption requests, stickiness, secondary discounts)?
- What are the current distribution rates in private equity across manager tiers and strategy segments, and what specific mechanisms are most responsible for slow distributions (lack of IPOs, financing costs, valuation gaps, buyer scarcity)?
- What portion of secondary private equity allocation growth is driven by forced sellers versus opportunistic rebalancing, and what are the typical discounts/premia being observed?