Private Markets Weather Policy Storm With Growth Intact

In Brief:

Recent policy shifts have created a pause in private market investment decisions and long-term planning, but the underlying fundamentals of the $13 trillion industry remain sound, according to a leading GP stakes investor. Robert Hamilton Kelly, partner and global co-head of the Petershill Group at Goldman Sachs, argues that while expectations for a strong 2025 have been dampened by policy uncertainty, most private market investments target services-oriented sectors that aren't directly exposed to trade disruptions. Speaking on the Alt Goes Mainstream podcast, Kelly oversees minority equity stakes in alternative asset managers across over 200 underlying funds representing more than $340 billion in aggregate assets under management. His firm has partnered with top-tier managers including Clearlake, Francisco Partners, and General Catalyst as the industry has evolved from $3 trillion a decade ago to its current massive scale.

Big Picture Drivers:

• Policy Uncertainty: Recent policy changes have created near-term volatility and investment decision pauses across private markets

• Industry Maturation: Private markets have quadrupled in size over the past decade, requiring more sophisticated business operations and infrastructure

• Wealth Channel Expansion: Growing access to high-net-worth investors is reshaping distribution strategies and creating new growth opportunities

• Market Bifurcation: Industry dynamics increasingly favor both large-scale institutional platforms and elite mid-market firms with strong performance

Key Topics Covered:

• GP Stakes Evolution: How minority equity investments in alternative asset managers have become mainstream investment vehicles with improved liquidity options

• Growth vs. Performance Balance: The strategic trade-offs between scaling assets under management versus maintaining boutique performance advantages

• Business Building Skills: Why successful alternative asset managers need both investment expertise and sophisticated platform management capabilities

• Liquidity Solutions: Development of permanent capital vehicles, Evergreen funds, and specialized secondary buyers transforming exit opportunities

Key Insights:

• Industry Resilience: Private markets fundamentals remain intact despite policy headwinds because most investments target services-oriented sectors that aren't directly exposed to trade and shipping disruptions, creating temporary rather than structural challenges.

• Information Advantage: GP stakes investors possess significant data advantages over public market investors, including access to detailed portfolio company valuations, LP demographics, and 20-year track records that public shareholders never see.

• Market Structure: The industry will likely bifurcate rather than consolidate, supporting both mega-platforms serving institutional clients with lower-volatility returns and elite mid-market firms delivering higher returns to selective investor bases.

• Leadership Evolution: Successful alternative asset managers increasingly need both strong investment performance and sophisticated business building capabilities, though these skills don't always reside in the same individual.

• Distribution Strategy: Wealth channel distribution will favor large platforms with extensive sales forces while elite mid-market firms access this market through GP stakes partnerships and selective relationships rather than building their own distribution.

• Exit Opportunities: Liquidity in GP stakes has improved dramatically through new permanent capital vehicles and specialized secondary buyers that didn't exist five years ago, solving traditional exit constraints.

Memorable Quotes:

• "You spend 80% of the time doing nothing and thinking about the race course and conditions that are coming. You spend 20% time holding on for dear life and trying to battle through something." - Kelly, drawing parallels between ocean racing and navigating private markets volatility

• "If you're a public market investor, even today buying a stock or share of a listed Alt's firms, they really don't have that information. They might have the back of the annual report, a list of funds with basic returns on capital and performance data. But that for us is like the first page of a 200-page investment memo." - Kelly, explaining the data advantage in private GP stakes investing

• "By and large, it's fake news" - Kelly, dismissing predictions that the industry will consolidate from 11,000 firms to 100 platforms

• "What these transactions are generally doing is raising capital into a business, not taking money out of a business" - Kelly, clarifying that most GP stakes deals involve growth capital rather than founder liquidity

• "You wouldn't just take the return number or the headline return number that I put on my own asset at face value. You look at comps, you look at the market and you look at if I've rented it out, what income it produced." - Kelly, advocating for income-based valuation methodology in GP stakes

The Wrap:

Kelly's insights reveal an industry at a critical juncture where short-term policy uncertainty masks longer-term structural growth drivers. The evolution from simple fund management to sophisticated business platforms has created new opportunities for strategic capital, while innovations in permanent capital vehicles are solving traditional liquidity constraints. Rather than facing consolidation that eliminates smaller players, the market appears headed toward bifurcation between large institutional platforms and elite boutique firms serving distinct client needs and return profiles.