Capital Allocators – Inside the Institutional Investment Industry

Episode: Michael Sidgemore – Alternatives Go Mainstream (Private Wealth 1, EP.443)

Release Date: May 5, 2025
Host: Ted Seides
Guest: Michael Sidgemore, Co-founder of Broadhaven Ventures and Creator of the Alt Goes Mainstream Podcast

Introduction

In episode 443 of Capital Allocators, host Ted Seides welcomes Michael Sidgemore, a prominent figure in the intersection of private markets, technology, and wealth management. Michael brings a wealth of experience from his roles at Goldman Sachs, Mosaic, and iCapital, culminating in his current endeavors with Broadhaven Ventures and his influential podcast, Alt Goes Mainstream.

Michael Sidgemore’s Background and Journey

Timestamp: [08:21] – [10:29]

Michael shares his unconventional path into finance, starting from his early aspirations as a soccer player which led him to the London School of Economics. At LSE, he organized the world’s largest student conference on hedge funds and private equity, laying the groundwork for his future in alternative investments. His career trajectory includes significant stints at Goldman Sachs, Mosaic, and iCapital, where he was instrumental in building the sales team and navigating the early days of the wealth channel in private markets.

Notable Quote:

“We’re at the early innings of changing the investment landscape, so this miniseries is just the beginning of our exploration.”
– Michael Sidgemore [08:27]

Origins and Evolution of the Alt Goes Mainstream Podcast

Timestamp: [10:29] – [13:03]

Michael discusses the inception of his podcast during the COVID-19 pandemic, a period that necessitated virtual connections. Recognizing a gap in the dialogue between General Partners (GPs), Limited Partners (LPs), and technology firms in private markets, he launched Alt Goes Mainstream in April 2021. The podcast aims to demystify private markets for the wealth channel, addressing the burgeoning interest of private wealth in alternative investments.

Notable Quote:

“There’s trillions of dollars in Wealth Channel capital looking to flow into private markets because they’re under allocated.”
– Michael Sidgemore [12:15]

Convergence of Institutional and Wealth Channels

Timestamp: [13:03] – [17:26]

The conversation delves into how large alternative asset managers have evolved from traditional private equity firms into multifaceted institutions handling diverse strategies like credit, infrastructure, and real estate. This evolution is driven by the necessity to serve both institutional LPs and the emerging wealth channel, which includes private banking, wirehouses, and independent wealth advisors.

Key Points:

• Growth of Large Asset Managers: Firms like Blackstone have expanded their asset bases significantly, incorporating wealth channel allocations.
• Operational Shifts: Asset managers are restructuring to manage increased complexity, necessitating new products and distribution strategies tailored to wealth clients.
• Consolidation Trends: Predictions suggest a wave of mergers and consolidations, reducing the number of firms from thousands to a more manageable number, focusing either on scale or niche specialization.

Notable Quote:

“The industry is at a real crossroads from a GP perspective and an asset management business evolution perspective.”
– Michael Sidgemore [16:45]

Distribution Strategies for Asset Managers

Timestamp: [17:26] – [24:06]

Ted and Michael explore the distribution landscape for asset managers targeting the wealth channel. Michael emphasizes that only the largest firms currently have the resources to effectively penetrate this space, citing the disproportionate capital raised by top firms compared to smaller peers.

Key Points:

• Resource Intensive: Serving the wealth channel requires substantial investment in sales, marketing, and operational infrastructure.
• Brand Importance: Larger firms leverage their established brands to attract wealth clients, utilizing platforms like LinkedIn and producing extensive content to educate and engage investors.
• Smaller Firms’ Dilemma: Managers below the $50 billion mark may struggle to compete, needing to decide whether to scale up or focus on niche areas to remain competitive.

Notable Quote:

“To truly go big and compete with the largest firms, you have to have tens if not hundreds of people focused on the wealth channel.”
– Michael Sidgemore [21:54]

Ecosystem for Distribution: Partnerships and Platforms

Timestamp: [23:53] – [28:49]

The discussion shifts to the ecosystem supporting distribution outside of in-house efforts, including partnerships with platforms like iCapital and the role of placement agents. Michael highlights how these platforms democratize access to alternative investments for wealth managers and advisors, enabling smaller firms to raise capital without building extensive salesforces.

Key Points:

• Platforms as Enablers: Platforms like iCapital provide marketplaces where wealth advisors can access a curated selection of funds from both large and niche managers.
• Customization and Differentiation: Wealth platforms seek to differentiate by offering customized private market products tailored to their clients' needs, fostering a competitive environment for asset managers.
• Opportunities for Smaller Managers: High-quality, niche-focused managers can find pathways to access the wealth channel through strategic partnerships and superior marketing efforts.

Notable Quote:

“There’s room for really high quality, smaller, more niche managers. They’re really good at something. They will be able to raise capital from the wealth channel.”
– Michael Sidgemore [24:06]

Understanding the LP Side: Wealth Channel Diversity

Timestamp: [25:51] – [33:05]

Michael breaks down the diverse segments within the wealth channel, contrasting wirehouses, independent wealth advisors, family offices, and self-directed individual investors. Each segment has unique decision-making processes and investment needs, presenting both challenges and opportunities for asset managers.

Key Points:

• Wirehouses: Largest source of capital flows into private markets, supported by extensive resources and institutional-quality processes.
• Independent Advisors: Fastest-growing segment, requiring tailored products and flexible structures to meet varied client profiles.
• Family Offices: Highly varied, with some operating like institutional LPs while others follow unique investment strategies.
• Self-Directed Investors: Emerging with platforms like Schwab’s ALT platform, catering to high-net-worth individuals seeking direct private market investments.

Notable Quote:

“The wealth channel is not just one thing. That’s also what’s been so challenging about working with the Wealth Channel relative to the Institutional channel.”
– Michael Sidgemore [26:05]

Decision-Making Processes in Private Wealth Investments

Timestamp: [33:05] – [35:34]

Exploring how different wealth segments make investment decisions, Michael explains the structured approach of wirehouses versus the fragmented nature of family offices and independent advisors. He underscores the importance of having a curated menu of vetted products to simplify decision-making for advisors and their clients.

Key Points:

• Institutional vs. Wealth Channel Cadence: Institutional investors have predictable cycles, whereas the wealth channel is more heterogeneous.
• Advisors’ Roles: Advisors must navigate a diverse client base, necessitating flexible product offerings and robust educational resources.
• Customization Needs: Providing tailored investment options that align with varied client profiles is essential for success in the wealth channel.

Notable Quote:

“Any advisor can now get access. Are they? No. But could they? Yes.”
– Michael Sidgemore [24:06]

Alternative Investment Strategies within Private Wealth

Timestamp: [34:01] – [39:23]

Michael discusses the allocation preferences within private markets, highlighting sectors like private equity, private credit, real estate, infrastructure, and GP stakes. He emphasizes the growing appetite for these strategies among wealth clients, driven by the pursuit of excess returns and diversification.

Key Points:

• Private Equity: Largest segment within private markets, attracting significant capital from the wealth channel.
• Private Credit: Rapid expansion from a few hundred billion to over $1.7 trillion, driven by demand for fixed income alternatives.
• Infrastructure and AI Investments: Targeting megatrends that require substantial capital, presenting opportunities for long-term growth.
• Evergreen Structures: Emerging as flexible investment vehicles offering liquidity options, making private markets more accessible to individual investors.

Notable Quote:

“The wealth channel has certain needs and requirements when it comes to liquidity, when it comes to allocating to private markets.”
– Michael Sidgemore [39:23]

Evergreen Structures vs. Traditional Closed-End Funds

Timestamp: [39:23] – [43:52]

The conversation shifts to investment structures, comparing traditional closed-end private equity funds with evergreen structures like interval funds and tender offer funds. Michael explains how evergreen structures provide greater liquidity and operational simplicity, making them more attractive to individual investors.

Key Points:

• Challenges of Closed-End Funds: Illiquidity over extended periods poses significant challenges for individual investors needing access to their capital.
• Advantages of Evergreen Structures: Offer periodic liquidity, lower fees, and tax efficiencies (e.g., 1099 forms instead of K-1s), enhancing accessibility.
• Impact on Returns: Evergreen funds may require lower return benchmarks compared to closed-end structures due to their flexibility and compounding capital.

Notable Quote:

“Evergreen structures create mechanisms that enable things like liquidity.”
– Michael Sidgemore [39:23]

Implications of Increased Fund Flows on Private Markets

Timestamp: [43:31] – [46:33]

Michael addresses the potential impact of substantial capital inflows from the wealth channel into private markets, contemplating whether this influx might dilute returns or inflate asset prices. He suggests that while some segments may experience lowered returns due to increased competition, niches and large-scale projects might continue to offer robust opportunities.

Key Points:

• Potential for Lower Returns: Increased capital might drive up asset prices, leading to compressed multiples and reduced returns in some areas.
• Sustainable Opportunities: Large infrastructure projects and specialized niches may remain insulated from oversaturation, maintaining attractive return profiles.
• Institutional Stability: Institutional investors will continue to play a significant role, partnering strategically with large GPs to optimize fee structures and investment opportunities.

Notable Quote:

“The question becomes, does the private market’s exposure on a risk-adjusted basis factoring in illiquidity still generate returns greater than what you can get in public markets.”
– Michael Sidgemore [43:52]

Future Outlook and Closing Thoughts

Timestamp: [46:33] – [53:37]

In the concluding segment, Michael shares his excitement about the ongoing transformation in private markets and his role in shaping its future through investment and content creation. He underscores the critical role of education, community, and strategic capital allocation in driving the mainstream adoption of alternative investments.

Key Points:

• Integration of Content and Community: Effective capital raising now hinges on robust content strategies and community engagement.
• Lower Middle Market Focus: Investing in niche, lower middle market asset managers poised for consolidation and growth.
• Adaptation to Technological Advances: Embracing technology to enhance investment processes and distribution strategies.

Notable Quotes:

“Content is going to be critical. I think content is going to be at the core of how firms think about capital raising.”
– Michael Sidgemore [48:33]

“My focus is on the private markets world. I want to help educate the community, both the GPs, the LPs, everybody else involved in private markets.”
– Michael Sidgemore [53:03]

Conclusion

In this enlightening episode, Ted Seides and Michael Sidgemore explore the dynamic landscape of private markets and the shifting paradigms as private wealth increasingly embraces alternative investments. Michael’s insights into the evolution of asset management, the critical role of distribution channels, and the transformative potential of evergreen investment structures provide a comprehensive understanding of the opportunities and challenges ahead. As the conversation highlights, the convergence of institutional sophistication with the burgeoning wealth channel is set to redefine the future of capital allocation, making this an essential listen for investors and asset managers alike.

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