Goldman Sachs Targets Ultra-Wealthy For Private Assets

In Brief:

Individual investors control approximately 50% of global wealth, yet their allocation to private assets remains minimal compared to institutions—creating what Kristen Olsen describes as "the great white space" in private markets. As Global Head of Alternatives for Wealth at Goldman Sachs, Olsen has spent 25 years navigating this frontier, witnessing what she calls an inflection point in recent years driven by unprecedented product innovation. The firm now advocates that moderate-risk ultra-high-net-worth clients allocate up to 27% of their portfolios to alternatives, a dramatic shift from traditional public market strategies. This conversation with Hugh Mac Arthur, Chairman of Bain's Global Private Equity Practice, reveals how Goldman Sachs is systematically breaking down barriers—from advisor education to liquidity solutions—to capture what the firm projects will be 30%+ annual growth in the individual alternatives space.

Big Picture Drivers:

• Market Access Gap: 85% of the world's largest companies remain private, meaning investors limited to public markets miss significant economic growth drivers, particularly high-valuation tech companies worth hundreds of billions

• Allocation Imbalance: The private markets represent 90% of available assets but attract only 10% of investment capital, while public markets capture 90% of money chasing just 10% of assets

• Education Deficit: When surveyed, ultra-high-net-worth individuals most commonly answer "I don't know" when asked to name three quality private asset managers, revealing a fundamental awareness gap

• Structural Evolution: The shift from traditional closed-end funds to semi-liquid evergreen structures enables broader participation while introducing new complexity around liquidity expectations

Key Themes:

• Systematic Portfolio Construction: Goldman Sachs has developed rigorous commitment planning methodologies to help clients reach target allocations through diversification across three vectors—vintage year, strategy type, and manager selection

• Education As Infrastructure: Before product selection or investment themes, the firm focuses on foundational education about why alternatives belong in portfolios at all, addressing both advisors and end clients

• Liquidity Innovation: The firm operates a quarterly secondary marketplace that has transacted over $1 billion in NAV over the past year, providing price discovery and exit options for wealth clients

• Product Democratization: The newly launched G-series evergreen funds draw on multiple deal origination sources—primary commitments, co-investments, and secondaries—to create diversified vehicles suitable for individual investors

Key Insights:

• Strategic Allocation Framework: For ultra-high-net-worth clients with $70 million or more, Goldman Sachs recommends alternatives comprise up to 27% of a moderate-risk portfolio, though this percentage decreases as you move down the wealth spectrum due to greater liquidity needs.

• Three-Dimensional Diversification: Building an effective alternatives portfolio requires diversification across vintage year (allocating consistently regardless of economic conditions), strategy type (private equity, credit, real assets, hedge funds), and individual managers.

• Yield Preference Pattern: High-net-worth and mass affluent investors show strongest interest in yield-based alternatives like private credit and real estate credit, where quarterly distributions provide both income and perceived risk reduction.

• Fee Structure Education: Individual investors accustomed to 10-basis-point ETF fees must be educated about carried interest and significantly higher fee structures in alternatives, though the focus remains on net returns after all fees.

• Secondary Market Dynamics: While Goldman advises clients against becoming sellers due to liquidity discounts, the secondary marketplace provides essential flexibility and creates opportunistic entry points for buyers seeking older funds at discounts to current NAVs.

• Platform Advantage: Goldman Sachs leverages its broad deal origination capabilities—spanning primary commitments, co-investments through external investing groups, and secondary transactions—to construct portfolios that can satisfy the liquidity requirements of semi-liquid product structures.

Memorable Quotes:

• "If you're not participating in private markets, you're missing out on a large share of what is driving economic growth" - Kristen Olsen, explaining the fundamental case for alternatives to individual investors

• "We're even starting with why the asset class. Why should you add it to a traditional portfolio, period" - Kristen Olsen, describing the baseline level of education required for advisors and clients

• "I would joke about the word semi-liquid alternatives, because we really don't want to have the word liquid anywhere near these investment products" - Kristen Olsen, emphasizing realistic expectations about liquidity in evergreen structures

• "Think about where these valuations are. Hundreds of billions of dollars in some cases, and yet they're private companies" - Kristen Olsen, highlighting how major AI and tech companies remain inaccessible to public market investors

• "Liquidity comes with a price. But sometimes you're willing to take that discount because you want the liquidity" - Kristen Olsen, acknowledging the trade-offs in secondary market transactions

The Wrap:

Goldman Sachs is systematically addressing the structural barriers that have kept individual investors underallocated to private markets through a multi-pronged approach: rigorous portfolio construction methodologies, scaled education platforms like Goldman Sachs Investment University, innovative semi-liquid product structures in the G-series, and a mature secondary marketplace providing price discovery. The firm's projection of 30%+ annual growth in individual alternatives reflects not just product innovation but a fundamental shift in how wealth is managed across the spectrum. As alternatives penetrate beyond ultra-high-net-worth clients into broader wealth segments, the industry faces a critical challenge of maintaining appropriate expectations—particularly around liquidity and fee structures—while delivering the diversification and return potential that make private markets compelling.