Private Markets Show Signs of Recovery as Exit Activity Picks Up, Schorr Says

In Brief:

Alternative asset managers are experiencing their highest levels of optimism about exit activity and IPO markets since before the 2022 rate hikes, with several industry leaders signaling that the pause in activity is behind them. Glenn Schorr, senior managing director and senior research analyst at Evercore ISI who has covered alternative asset managers since the first firms went public, shared his analysis during an interview on the "Going Public" series of the Alt Goes Mainstream podcast with Michael Sidgmore. Schorr, who has consistently ranked among Institutional Investor's All-America Research Team for his coverage of brokers, asset managers, and exchanges, provided insights into the recent quarterly earnings season and emerging trends across private equity, private credit, and the expanding wealth channel market.

Big Picture Drivers:

• Exit Environment Recovery: M&A and IPO activity showing genuine improvement after years of fits and starts since rate hikes began

• Perpetual Capital Advantage: Firms with longer-duration capital structures gaining competitive advantages in deployment and returns

• Wealth Channel Expansion: Private markets penetration into retail wealth management accelerating across multiple product categories

• Private Credit Evolution: Market expanding beyond traditional direct lending into investment-grade and asset-backed finance territories

Key Themes:

• Scale and Diversification: Larger, more diversified platforms with high margins can reinvest in growth while smaller firms face increasing competitive pressure

• Duration Matching: Insurance companies and perpetual capital vehicles providing better asset-liability matching than traditional bank financing

• Performance as Arbiter: Fee compression pressures will ultimately separate top-performing managers from mediocre ones as competition intensifies

• Technology and Distribution: Sophisticated servicing platforms becoming essential for success in the wealth channel market

Key Insights:

• Animal Spirits: Current market optimism is the highest since 2021, with CEOs across the financial sector reporting stronger investment banking pipelines and exit activity than seen in recent years.

• Perpetual Capital Premium: Companies like Blackstone (47% perpetual capital), Blue Owl (87-91%), and Apollo (75%) command higher valuations because locked-up capital provides competitive investing advantages and reduces redemption risks.

• Wealth Channel Resilience: The retail wealth management channel demonstrated remarkable stability during volatile quarters, continuing to raise capital even when institutional fundraising slowed significantly.

• Private Credit Expansion: The market is evolving beyond non-investment grade lending to compete directly with traditional corporate credit markets, as evidenced by Apollo's $11 billion investment-grade deals.

• Insurance Model Success: Apollo's acquisition of Athene and subsequent UK expansion through Aora demonstrates the power of combining insurance balance sheets with direct credit origination.

• Fee Structure Evolution: While headline fees may appear stable, institutional investors are negotiating significant volume discounts, creating pressure for managers to scale efficiently or risk margin compression.

Memorable Quotes:

• "All in the results were pretty good. All things considered, I think you saw decent fundraising, better deployment than people thought" - Schorr, assessing the recent quarterly earnings season despite market volatility

• "There's been fits and starts of optimism, like I said, since rates went up and then leveled off... I would say right here, right now, the optimism is as high as it's been" - Schorr, explaining the evolution of market sentiment and current confidence levels

• "The companies that have been able to get public for the most part are pretty big, pretty broad, pretty diversified and are in the process of continuing to invest in scaling" - Schorr, describing the competitive advantages of larger alternative asset managers

• "Eventually there were more mutual funds than there were stocks. Still true. There are now more ETFs than there are stocks and transparency around performance, availability of lots of product, competition... eventually, fees came down a lot" - Schorr, drawing parallels between traditional asset management fee compression and potential future trends in private markets

• "I will pay you high fees and I will lock up my liquidity and I expect to get better than publicly available returns in that asset class or else why would I do that?" - Schorr, explaining the fundamental value proposition that private markets must consistently deliver to justify their premium pricing structure

The Wrap:

The private markets industry stands at an inflection point where cyclical recovery meets structural transformation. While exit activity and market optimism are reaching pre-rate hike levels, the fundamental business model is evolving toward perpetual capital structures and wealth channel distribution. Success will increasingly depend on scale advantages, technology infrastructure, and the ability to deliver consistent performance across market cycles. The firms best positioned for growth are those with diversified platforms, long-duration capital, and sophisticated distribution capabilities—creating a potential separation between industry leaders and smaller competitors.