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The Long View
Hilary Wiek: Perspective on Private Markets
00:49:37
PitchBook’s principal fund strategies analyst provides a lesson in the parlance of private markets as they open to a broader spectrum of investors.
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- [00:00]
Pomona Investment Fund Narrator
In private equity secondaries, relationships aren't just an edge, they're everything. Trust and reputation open doors long after deals close. For 10 years, the Pomona Investment Fund has brought institutional private equity exposure to individual investors, delivering opportunities others can't. Think private equity is just for large institutions, think again. All investments carry risk, including possible loss of principal. For details on the Pomona Investment Fund and its risks, visit Pomona Investment Fund.com investors.
- [00:30]
Disclosure Announcer
Please stay tuned for important disclosure information
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Hilary Wick
at the conclusion of this episode.
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Ben Johnson
Hi and welcome to the Longview. I'm Ben Johnson, head of Client solutions with Morningstar.
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Christine Benz
And I'm Christine Benz, director of personal finance and retirement planning for Morningstar.
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Ben Johnson
Today's guest on the Longview is Hilary Wick. Hillary is a principal analyst at Pitchbook, where she leads PitchBook's coverage of fund strategies and performance, publishing primary research on the alternative space. Hillary also leads PitchBook's coverage of the ESG and impact investing space. Hillary has over 20 years of experience in asset owner, manager and advisory roles. Prior to joining Pitchbook, she was the director of investments at the St. Paul and Minnesota Foundations, where she handled portfolio management, impact and ESG investment, investment, due diligence and monitoring and investment operations. Before that, she worked in senior positions at Siegel, Rogers Casey, the South Carolina Retirement Systems Investment Commission, Buckingham Financial Group, Dayton Power and and Key Corp. Wick received a master's degree in finance and economics from Case Western Reserve University and a bachelor's degree in business leadership and finance from the University of Puget Sound. She is based in Pitchbook Seattle Office. Pitchbook is a Morningstar company. Well, Hilary, welcome to the Longview.
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Hilary Wick
Thanks so much. Yeah, I appreciate being invited.
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Ben Johnson
We were hoping you might be able to share with us to begin a little bit about your journey into private markets recently research and your current role at Pitchbook.
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Hilary Wick
Yeah, absolutely. It's a little long and circuitous. I joined the Investment World in 1992. So I've been through and seen a lot, but from a lot of different vantage points. I first figured out private equity existed, I would say in 99 when I joined a public utility, of all places, that had a billion dollar private equity portfolio. And so that's, you know, as an analyst there, I started meeting money managers and learning how the private markets operated. Flash forward a few years. In 2007, I went to the State of South Carolina Retirement Systems and raised my hand to help launch the private equity program there. They hadn't invested in any private markets up until that point. And then I spent seven years, I guess, doing manager research at an investment consulting firm. And while that was public manager research, it really informed a lot of my views on how to diligence a fund manager, particularly on the qualitative side, which is so important in private markets. You know, meeting hundreds of managers every year really gets you a lot of reps. And then I guess my last stop before PitchBook was at a foundation where we were covering all asset classes and private markets were a part of that. So I joined PitchBook six years ago this week actually, and that was to write research on private market fund going zons. Given that my background was as an lp, I tend to be more top down and discussing my what's going on in broader fund trends and cash flows between LPs and GPs and things like that. While we have separate teams at PitchBook that are focusing more in the weeds on private equity and venture capital, for example. And then I internally do a whole lot of consulting related to how these markets work. Because I'm one of the few people at PitchBook that joined. Well, at the time at least I was one of the few. We've hired several more who joined with some experience and can really help up our game in these markets, both from a research as well as from a product perspective. And then the latest research has really been on Evergreen and bringing private markets into the hands of folks who have historically been excluded because of income or wealth hurdles that were difficult to meet. So I guess that brings us pretty current to today.
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Christine Benz
So Hillary, I'm wondering, just so that we can make sure that everyone's following along, you referenced LP and GP in the context of your last response. Can you talk about what those things are just for people who are not steep in private markets as you are?
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Hilary Wick
Yeah, absolutely. So up until what we've called the Evergreen evolution, which is this creation of products that have semi liquid characteristics, private markets were typically accessed through what we're calling drawdown funds. In other words, you commit money, but they don't take your money until they find a good opportunity. And the agreement that is signed has two main parties. You've got the general partners who are the ones running the fund, and you have the limited partners who are the folks with piles of money that need to be invested. So the LPs are the allocators, they're the people with money to invest. The GPS are the ones who are responsible for investing that during the life of the fund.
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Christine Benz
Okay, thank you, that's helpful. So we wanted to start with a really broad overview of global private markets today. From your vantage point, how Would you describe the current state of global private markets heading into 2026?
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Hilary Wick
Yeah, I think it's hopeful. As I mentioned, we have some other teams on our research team, and I was reading through their outlooks for the year. You know, we saw deal activity picking up last year, which means that private companies being bought and sold are coming back to happening. We had a real dry spell for a few years following 2021. 2022, I would say Europe has been a little bit better in terms of deal activity than the U.S. but 2025, we went in with a lot of hope. That was kind of stymied by an erratic government in the US in that it's really hard to plan for the future if you're not sure what the tariff regime is going to be or what geopolitical considerations need to be brought into account. I think with interest rates falling, there is a little more hope that investors can put money to work, can maybe start selling off some of their aging portfolio companies, and maybe the private markets can get back to more of a business as usual that was, you know, maybe more characteristic of the years going into the pandemic.
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Ben Johnson
Hilary, I'm curious what you're seeing and what PitchBook is measuring and monitoring with respect to some of the operators in this space and their ability to raise new money from their investors. It seemed like 2025 maybe was somewhat challenging there. What are some of the things that are driving this slowdown in new money coming into the space?
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Hilary Wick
Yeah, there's a few things, and we've been tracking them for several years. Honestly, the first one I would say is lack of distribution. So think of I talked about how these drawdown funds, they don't take your money until they come up with a good idea, but they also don't give you your money back until they sell their portfolio companies. And so if they're holding these companies longer because they don't think it's a good time to sell, then the limited partners aren't getting their money back, which means they don't have new funds necessarily to commit to new funds. So that leaves them overallocated without a lot of room in their asset allocation to be putting more capital to work. So that's been a big driver, particularly in venture capital. Private equity hasn't been quite as limited when it came to the deal activity, but venture capital has been aging their portfolios and not selling off because they've been waiting for the IPO market to open up and for strategic buyers to be going around and buying more companies. I mentioned earlier, the market uncertainty, it's been difficult for folks to figure out the right places to place their bets for their 10 plus years when the global investment landscape has been changing day by day. I think some of that has settled down in the last few months. And with falling interest rates, that makes people a little bit braver in jumping in because there is a little bit less risk on the table when you're not paying as much for your debt. But it has been a factor in keeping people from making large commitments to private market funds. And then the last one which actually leads into the evergreen evolution I referenced earlier, is there's been a decline in institutional investors as a source of capital. Pensions have been declining over the last 10 plus years. A lot of people that I work with now will never see a pension or have an opportunity to be in a pension. It's all in defined contribution now. And because of that, the asset managers are creating these evergreen funds. They're trying to create products that will be attractive to where the money is flowing, which is defined contribution, which is individual accounts that people have, as opposed to, you know, big piles of money like the pensions. Occasionally a sovereign wealth fund will get created, but it's just not enough to make up for all of the institutional capital that has gone away for the marketplace that was a traditional reliable source of capital for the private markets.
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Ben Johnson
Hillary, I'm curious to know what, if any, role you think valuations might be playing in this slowdown as well. Certainly if we look over the other side of the fence at global public markets, be it equity, be it different fixed income securities, valuations are lofty in some cases, maybe unprecedented levels, spreads for different types of creditors tight as they've been in quite some time. Is that having a similar impact on risk appetites, maybe valuations in the private markets?
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Hilary Wick
Yeah, I would have said that was more of a factor. Coming after the bust or the bust lit that we had during or just following the pandemic, there were a lot of people that had looked around at the public markets. They looked around at other deals that had happened in the private markets and said, oh well, based on comparable companies, my company is now worth X. And with a rapid decline in the stock markets and a lack of fresh deals that would provide current valuations, it was a little tough for people to swallow and say, wow, it used to be worth X and now it's worth significantly less than X. And so that causes deal activity to slow down because even if someone's shopping for deals, they're going to want to pay a lower price and the folks that had in their heads that their company was worth a higher price, it takes a while for them to adjust to the new reality. And I think it's much more true in the private markets. In the public markets, you've got a stock market that's telling you what a lot of people think it's worth. In the private markets, where things trade much less, it's sometimes a little bit harder to come up with what the market in caps is really feeling about your company. And there ends up being a lot of investor psychology in whether a deal environment is going to be strong or not. So I think valuations can absolutely play a part, but I think people have probably adjusted some to the new reality. And especially with interest rates down, I think that is helping folks to think that they can make money at the valuations that we have today.
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Christine Benz
Sticking with that high level overview, are there some regions or asset classes that are outperforming others in terms of deal activity and capital flows?
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Hilary Wick
Yeah, I was thinking about this question how outperformance is a bit of a funny word in private markets given the lag in reporting the fact that returns are really only guidance until the deals are fully cooked and exited. But to get back to the question, we are seeing some positive signs in some pockets of the private markets. For my immediate area of coverage, secondaries have been a great place for over five years now. Record fundraising, record deal flow, good returns. There's been broader acceptance of the strategy across both limited partners and general partners, particularly with fund managers that are entering the space. There's been a lot of fund managers that would not typically have been buying secondary fund interest that have decided to set up those shops, particularly given the aging of portfolios and the subsequent use of what are called continuation funds. Continuation funds are a fairly new trend. I would say that when I joined PitchBook six years ago, I'd never heard of them. That doesn't mean they didn't exist, but they hadn't crossed my brain yet. But they are very common now where a general partner who's looking at their aging portfolio may have an asset in their portfolio that they really like. But maybe the drawdown fund is out of capital to call from their limited partners. The company may need to be supported. They're not ready to sell it yet, so they move the asset into this new fund, a continuation fund, in order to potentially raise a little bit more capital, potentially cash out some of the old limited partners who were looking for some distributions and provide a little bit more Runway for these companies that has led to more deal flow for folks who are buying secondary interests, and that has created a vast expansion in fundraising for secondaries over the last five, six years.
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Christine Benz
Hillary, I just want to interject a question real quick. When you say secondary interests and secondaries, what does that mean Exactly?
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Hilary Wick
Even at PitchBook, we use it in two different ways, which can be super confusing in my world because I'm the funds analyst. Secondary purchases are maybe I'm a limited partner who has an interest in a private equity fund. I've decided I don't want that anymore. For whatever reason it could be I'm feeling distressed. Could be I decided I want to maybe I'm a new CIO and I don't like the stable of managers I inherited and decided I want to sell that to someone else. The general partner doesn't get involved in that transaction. The limited partner goes to a broker, they find another buyer for that. And that's the secondary market, as many of us learned about in our investment studies. There are also in private markets, secondary company transactions that are going on where maybe founders are trying to sell off some of their stake in their companies. But when I'm talking about secondary funds, I'm talking about funds that are out there buying up other people's interests that have gotten older, more seasoned, and still have some assets that need to be worked out before the original fund winds down and liquidates.
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Ben Johnson
Hilary I'd like to try to begin to unpack some key lessons for our audience, especially those that are not necessarily fluent in the parlance of private markets, but may be very familiar and have invested very successfully for years in public markets. And one of those areas where I think there's very important but nuanced differences comes with respect to how the performance of these funds are measured. You and your team have done a lot of really great work on this over the years. I'm wondering if you can begin to help us understand what the uninitiated should look at what they need to understand with respect to interpreting the performance of different funds that are operating and specializing in private markets.
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Hilary Wick
Yeah, that's a huge question and I wrote a couple pieces. Happy to share with folks if they look me up. I'm the only Hillary Wick on LinkedIn. So the first major, major point is that returns from private market drawdown funds are calculated with a different calculation than what you will see in a mutual fund or stock index. The stock index, the mutual fund, the ETFs, those are all quoted as what are called time weighted returns. And the assumption there is that you put in your money on day one and you pull it out when you're ready to redeem. But the asset manager or whoever takes your money has your money for the entire period. The assumption on drawdown funds, they're using what's called an internal rate of return, an irr, that one actually assumes, and quite rightly, that the fund manager only has your money when they have an opportunity that arises. And so if you've committed, say $100 million, and that's a big number, I guess, for this audience, but in the institutional space, that's kind of numbers we use, but we could scale it down to a million. They may only have half of your money at any given time. As they identify companies to invest in, then they call your capital from you and then when they sell the companies, they give you your capital back. And so you are in charge as the limited partner of keeping track of your capital that you've committed when it's not in the fund manager's hands. And that requires a different calculation. But what it also means is that IRRs tend to be higher than time weighted returns and they should not be compared to each other because the time weighted return has to account for the cash drag or maybe investing in assets that weren't exactly what you were looking for. While the investment manager finds a place for your capital with IRRs, they're only counting the investments that got made with your capital. And what you did with your capital in the meantime is not part of that calculation. Hopefully I said it a lot more clearly in my paper and as I said, happy to have people read it and get the logic a little more clearly there. But the main thing people should take away is if they see a number. I was just looking at this for a paper I'm putting out next week. If you see a long term, I was looking at a 10 year number on global private equity of something like 13% for the same time period. A time weighted return for, I think it was Morningstar's Global Equity Index, it was something like 10%. And that's not necessarily that private equity outperformed by 300 basis points. It's that they're using different calculations. There is a translation calculation that's called a pme, a public market equivalent that provides a ratio that basically if the number is above one, then it turns out the private markets would have been a better experience over the time period. And if it's less than 1, then you would have done better with public markets. But yeah, I think the subtitle of the paper I wrote last January was why are there so many numbers? And I go through a lot of simple examples for people who didn't major in finance to help explain all of these nuances that people should be aware of.
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Christine Benz
That's a helpful discussion. I wanted to ask about fees because that is something that we hear a lot in the context of private markets that yes, maybe there's a long term return advantage in some of these areas, but the fees could gobble up every extra bit of return that you might earn. Can you talk about that, how fees compare relative to investing in public markets?
- [19:06]
Hilary Wick
Yeah, it is. It's a different world. So as part of the regulatory framework for private markets, they are not for. Again, now I'm talking drawdown funds, only private equity funds. And I just say private equity generically, but I mean kind of private markets generally. In terms of these fund types, the standard for many, many years has been what is called 2 and 20. So a 2% management fee and then a 20% performance fee. So if an asset manager bought something for 50, sold it for 100, they would have been collecting 2% on the 50 throughout the life of the investment, and then they would get 20% of the 50 million extra that they value created. That can end up with some really big dollar values. If you were investing over 10 years in a private equity fund, again put in $100 million, 2% a year over 10 years is roughly 20 million extra dollars going to that fund manager. And then there's the performance fees. Now investors have accepted this model because they believe that it creates nice alignment for the fund manager, that they are going to try to maximize your financial returns because their biggest paycheck should come from the incentive fee on the back end of selling this investment. Many people believe that the model has paid for itself, that these extra fees are worthwhile, that the advantage of controlling a company, which is what happens in private equity particularly means that you can maybe make more money than if you were just buying shares in a company and hoping that it goes up. You know, there's wide dispersion in private markets among fund managers. And so there is opportunity to do very well. But then there are plenty that do subpar and don't outperform what someone might have been able to do in the public markets, regardless of fees. So, you know, what we always say is that it is super important to spend a lot of time on manager selection because the experiences can vary widely in the private markets.
- [21:08]
Pomona Investment Fund Narrator
In private equity secondaries, relationships aren't just an Edge. They're everything. Trust and reputation open doors long after deals close. For 10 years, the Pomona Investment Fund has brought institutional private equity exposure to to individual investors, delivering opportunities others can't think private equity is just for large institutions, think again. All investments carry risk, including possible loss of principal. For details on the Pomona Investment Fund and its risks, visit pomonainvestmentfund.com investors and
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Ben Johnson
Hillary, one of those sort of vectors of variance really between not even just different funds in the private markets, but, but certainly most starkly between private market funds and public market funds, is that the frequency and the amount of informational content and the valuations of the positions in those portfolios is markedly less. Right. So it's not as though you're looking at, say, a public equity like Apple. And there's the opinions of millions of investors globally with different levels of information, conviction, opinions, what have you being imputed into that price all day, every day. There's relatively a paucity of information which I think has implications for performance and most notably volatility. So when investors look at I think in particular the volatility profile of private market funds, what do they need to know? And is the level of volatility, which tends to be at least again at face value, much lower, really, as it seems at face value?
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Hilary Wick
Yeah, there's again a whole other podcast, I think, in that question, and I would actually volunteer one of my quantitative colleagues to speak to that. But overall I would say yes, volatility looks lower in private markets. Think about the example of April of last year. If somebody had marked their portfolio at 100 on March 31, Liberation Day comes around a week later. But by the end of the quarter, and private equity tends to value their portfolios quarterly, we might have almost gotten back to where we started. And so while the public markets gyrated massively in that time period, if you just looked at the March number and the June number, it looks like you would never know something happened. So that's one aspect of where volatility is hidden. The other is because things aren't trading that you don't necessarily have a great comparison. A lot of fund managers maybe don't have a good reason to change the price much from quarter to quarter. Now, I would say in a drawdown fund, as a long, long term investor, I don't care necessarily about the change from quarter to quarter. The most important is what they give me back at the end of the investments. It's invested life. And so if they bought it for 50 and sold it for 100 and it was over two years. That's a great return. If they kept it at cost for the entire time until they sold it. It doesn't really matter what the numbers were in between. It's the money they made. Me over the life of the investment now where this has a significant issue and I just wrote a lot about this in the paper I have coming out next week is in the Evergreen Fund space. Because in the Evergreen fund space people are buying into these funds and redeeming from these funds at the valuations the general partners are putting on these investments. And so real money is changing hands based on these valuations. And people should be very attentive to what valuation policies are on these investments because as I said, real money is changing hands and based on the prices they set, the buyers or the sellers might be advantaged or disadvantaged depending on the place they are in the market cycle. So valuation's very important. I'm maybe a little bit too loose in saying I don't care about interim returns, but if you are looking at private markets as a long term investment, quarterly marks shouldn't matter a whole lot to you because it's only a minor indication of where the portfolio is at any given point in time. I don't know if you guys have done much investing or thinking about investing in private market funds, but there's a bit of a wink and a nod about every single fund manager that comes around is top quartile when they're fundraising. It's an interesting mathematical conundrum.
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Ben Johnson
Yeah, the lake will be gone of private market investing for sure. Hillary, you mentioned in passing Evergreen Vehicles. There's a variety of names floating out there in the marketplace today. Semi liquid funds, perpetual capital vehicles. I personally am trying to trademark the term semi perpetu green. To just put it all to rest though that's a mouthful. I'm curious if you could speak specifically what types of vehicles you're referring to when you refer broadly to Evergreen Vehicles. What is driving growth in both sort of managers as well as investor interest in this space and kind of frame it in the broader evolution of different access points investors have at their disposal to private markets.
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Hilary Wick
Yeah, I'll just say up front that our team put together a paper a little over a year ago called the Evergreen Evolution that talks a lot about this if people want more than what I'm about to say. But I talked earlier about the trend of institutional capital going away, that pensions aren't being created and a lot of them are freezing or de risking. And so money Managers are looking for new sources of growth for their assets under management. I would say another trend that in my opinion is causing this is the largest money managers went public and Wall street appreciates consistent growth and consistent earnings. And they like that. These evergreen funds are going to create that growth and they have a nice steady income stream from fees rather than having to wait for the performance returns that they get from the 20% performance fees and a drawdown structure. And so the asset managers really like this. And then on the other side, you've got the investment individuals who have been previously excluded from this because they didn't have the capital to invest. A lot of times minimums on private market funds can be a million or more. By creating these new structures, they have lower account minimums, they're creating structures that have a little more liquidity. You talked about the structures we're talking about. I mean, I would say the largest at the moment are interval funds in terms of getting exposures in a semi liquid product. Those ones, the interval being discussed there is how often you can get out of the fund. So I talked earlier about how in drawdown funds you can only get out by maybe using the secondary market. With the evergreen funds, the fund manager provides liquidity. The common structure for an interval fund is quarterly. They will allow up to 5% of the assets of the fund to be liquidated or to be redeemed. I should say there are other structures. There are tender offer funds there. I believe Instead of promising 5%, it's more of a. When the asset manager feels like they have some liquidity to offer, they will offer it. So it's a little more in the hands of the asset manager. There are also BDCs, which are business Development Corps, which are credit working with smaller companies. And the fourth type that we're tracking are non traded REITs, so real estate investments. I'm probably most familiar with the first two structures at the moment though we put out some research that kind of defines each of these types. But our umbrella term at Pitchbook has been evergreen. I think Morningstar has been leaning more towards semi liquid. But we are talking about the same things here. And I think there were more parts to your question that I might have missed. So apologies.
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Ben Johnson
No, I mean, Hilary, you absolutely, I think hit on some key components there just with respect to, I think importantly the historical framing and also just specifically what some of these new and different access points are that exist under this umbrella.
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Christine Benz
Following up on that, Hillary, I wanted to ask about the push to get smaller investors into private markets so If I'm a financial advisor thinking about whether and how to integrate private markets into traditional allocations, traditional client portfolios, how should I approach it?
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Hilary Wick
Well, the piece I have coming out next week is actually going to be really helpful. I think to a lot of people it is providing a lot of questions for fund managers on how to diligence what's going on because there are right now, there's a lot of dispersion among the evergreen funds that are being created. And when you say how to approach it, I would say that unless your client can put to work, I don't know, two to $10 million a year into private markets, they probably are thinking about this evergreen fund structure rather than direct fund commitments into drawdown funds. You know, it is a diversifier. It is a way to hopefully get access to an illiquidity premium out there by being patient with your capital. I will say that for investor suitability, patience should be a characteristic of that investor. If they are getting into these products because there is some liquidity and they hope to be able to trade in and out of it, that's probably not a great fit. A lot of the fund managers actually are kind of bristling at the term semi liquid because they don't want to put too bright a light on the liquid part. There'll be moments in time where liquidity in the market is not advantageous to a fund. And they don't want investors flooding out of the fund because they get scared about the markets. They want people with an attitude of long term thinking that are willing to park some money for the long term into assets that have a long term perspective. When you're buying an entire company, you should be thinking longer term than if you're buying a few shares that you can flip out at a moment's notice. So I would say personality or the investor's profile is important for how you're thinking about this. Now. There's all sorts of asset allocation considerations to think of. I think there's a lot of people talking about maybe take half from your equity if you were to do maybe a 20% allocation to privates, maybe half from your equity, half from your fixed income. I will say that a lot of the products that have been created thus far, while I think there's a lot of hype out there, and I wrote a different paper last quarter, there's a lot of hype out there about, oh, adding private equity to your portfolio is going to add a lot of return to your portfolio. And while that may or may not be True, most of the products that have been created have been income producing, have been credit funds, have been real estate funds, have been infrastructure funds, and part of that is because of liquidity profile. If you're talking that you're promising 5% liquidity a quarter, it's nice for the asset manager to be spinning off income that they can use to pay for redemptions that come through. If you buy a whole company, you can't sell part of that company to fund redemption requests. And so people should be thinking about what product offerings are out there. They should be looking at track records, they should be looking at the underlying aspects of the fund management. They said. The paper I just finished is I think about 7,000 words just filled with questions that folks should have. One of the examples I use is maybe you buy this Evergreen fund because it's got a great name brand because you're not as familiar with private markets, but you need to look under the hood and make sure that that name brand actually is backed up by a team that really understands this shift in liquidity profile. Drawdown fund managers haven't had to think about funding redemptions ever. They've never had to figure out, oh, if somebody gives me their entire funds investment upfront, then they've got to find a place to park that. In drawdown funds, teams have only ever called capital when they have a good idea and then they've given the capital back when they sold that idea. So it's a different way of thinking through things and they need to make sure that the folks entering this market have really thought through some of the questions that make management of these portfolios very different from what they've done in the past.
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Christine Benz
I could see someone listening, whether a financial advisor or certainly an individual investor, and they might conclude this is all in my too hard pile, that it might not be worth the incremental return advantage I might obtain by investing in some of these asset classes. Is that a legitimate point of view? Do you think that some people might just want to walk on by?
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Hilary Wick
Oh, absolutely. It's legitimate. I mean, nobody should get into things they don't understand. And if you're not able or willing to put in the time to understand it, then I think there are perfectly good options in the public space. I will also say that just because you can doesn't mean you should. You know, there's time horizon issues that, you know, if you are saving up money to buy your yacht next year, probably shouldn't park it in something that is even though semi liquid, it is considered a Long term investment. So as always, you should be thinking about suitability in terms of your investment timeframes with these and the other. Just because you can doesn't mean you should. Consideration is look very hard at the fees on these things. The less you put in, the higher your fees probably are going to be. And there's layers upon layers of fees that are being charged on these. There can be fees for getting into the fund, fees for getting out of the fund, there can be lockup periods, there can be expense ratios, there can be performance fees. Morningstar is doing a great job of vetting these funds and putting ratings on them. And I would encourage people to take a look at that because they are being very thoughtful about all of this. And I think Pitchbook and Morningstar are hopeful that the work that we're putting in may cause the industry to converge and be a little bit less complex. Because right now it's been really hard to maybe add up what all the fees are and whether it might actually be worthwhile.
- [35:14]
Ben Johnson
You alluded to some of the considerations, most notably, I think with respect to liquidity. And I think oftentimes it's easy to fall into the trap of speaking to private markets in very broad terms. But underlying that broad brushstroke definition, there's a lot of underlying asset classes with different investment prospects, liquidity profiles, you name it. So when you think about matching the underlying asset class to the wrapper, where are their prospective mismatches? So you mentioned semi liquid funds as an example, and the preponderance of assets there today sit in largely income generating strategies that in say, private credit might have more liquidity, is there a mismatch there? If all of a sudden you try to introduce, say a venture capital strategy to a product like a semi liquid fund that might offer quarterly liquidity, and what do investors need to watch out for here just with respect to the potential risks and mismatches between the underlying things that they're trying to invest in and the fund type that's giving them access to those investments.
- [36:26]
Hilary Wick
Yeah, you're spot on. The reason why the preponderance of interval funds are income generating funds is because they are better suited for providing the liquidity that might be demanded on a quarterly basis. The funds that we've seen setting up for private equity and venture, which are still a fairly small slice of the pie in these, the tender offer funds, where it's more in the manager's hands whether they want to offer liquidity as opposed to promising liquidity. So yeah, so I think that Naturally, the funds are sorting themselves into structures that make more sense for the underlying assets. That said, there have been a few high profile cases where in 2025 where the fund manager realized, wow, we don't have the liquidity that we need and they have restructured the fund. One of them listed their fund I believe to become a closed end traded fund because they were tired of dealing with the cash flows and another one tried to merge of some of their funds. So I think there is still some activity on the fund managers or that maybe they haven't been stress test enough for them to realize really how to best manage these funds. And so the investors need to be aware and really probe these fund managers to make sure they've thought through some of the worst case scenarios to ensure that they are managing these in a way that are suitable for both the assets and the investors timeframes.
- [37:50]
Christine Benz
I wanted to ask about ESG or sustainable investing. How do those themes currently play out in private market strategies? If they do?
- [38:00]
Hilary Wick
Yeah, and actually I've been been one of the primary authors on that at Pitchbook over the last six years. Particularly on the impact investing space. There's a lot of folks that generalize that ESG is more of a public market thing and impact is more of a private market thing. I would argue that ESG can be applied to any investment. That if you take a look at it, you could improve your employee experiences, you could improve your environmental impact, whatever. If you think of it as a risk framework, which many do, that could happen for any investment on the impact side because there is more control of investments where you buy a whole company. In private equity, for example, there's plenty of opportunity there to ensure that if you are seeking impact that you are able to actually have that impact and measure that impact. If you were passive investor in a quote unquote impact company in the public world, you may not have a big enough share stake to be able to influence the board to do what you think is impactful. But if you actually own the company, hopefully you're well aligned with the management and you can do what you think is best to provide both financial as well as environmental or social returns. So we just put out a piece in December that is our impact Investing update that provides data about private market impact investment goings on. We've tagged over 5,000 private market funds that have the appearance of seeking impact. That's all time. So again in the private markets, a fund manager will raise a fund, they'll invest a fund and then they'll give the money back and create a new fund. So 5,000 funds may not currently be active, but that gives us a historical view in terms of fundraising and performance and deal activity that has been useful to impact investors in the private space to see where money is flowing, what geographies are doing what and that sort of thing. So, yeah, it's absolutely a thing in the private market space. I would say it's harder to nail down ESG funds in the private space because folks that are applying ESG may, you know, you could apply ESG to the dirtiest of companies and still make the company better. And arguably that has a bigger impact than only buying clean companies because you're actually, you know, net adding to the betterment of the world. And so we don't really have a list of ESG funds per se, but we do have a list of impact funds that can help folks with particular impact missions to align their investment dollars with their hopes for impacting various areas such as affordable housing or health or climate, for example.
- [40:43]
Ben Johnson
Hilary, I wanted to finish by maybe asking you to look ahead and specifically asking you if you had to pick one big theme that we're going to see or investors should be focused on in private markets in 2026, what would that theme be and why?
- [41:01]
Hilary Wick
I feel like the mood is a little bit of hope and keeping a close eye on some of the data. When I joined Pitchbook, every year was a record year when it came to fundraising, when it came to deal activity. And I think we're a ways from hitting those records in a lot of the asset classes, at least. But people are really closely watching to see what the mood is. I think I mentioned earlier that there's a lot of investor psychology in private markets of like, is now the time to get in or not? Is now the time to the deal activity is going to pick up, that the IPO window's going to stay open. And I think we're still sort of waiting on some of those signs that it's off to the races again on private market investing. As I said, Europe is a little more hopeful, I think, than the US at this point. There's still a lot of daily news coming out of the US that make it a little more difficult to figure out where to place bets. People are keeping a close eye to decide whether it's the right time or not.
- [42:04]
Ben Johnson
One of the, I think other areas certainly that we've heard a lot about looking forward into this year is what feels like almost a mandate now to increasingly introduce some form or another of private market Exposures into investors retirement plans coming soon Potentially to a 401k near you, if it's not already there, private credit or private real estate or what have you. What are your thoughts on the prospects for the growth of private market allocations, specifically in Americans retirement plans?
- [42:38]
Hilary Wick
Yeah, we're all keeping an eye on the first week of February because that's six months after the executive order that President Trump put out in August where he requested the Department of Labor come up with some rules around this or some guidelines. I should say it won't be mandated. It's not. You must include it. But people are expecting that there will be encouragement. One of the biggest issues around getting private markets into 401 s has been litigation. If you think about most 401 s and the options that are sitting in your 401 program, it was the employer that decided what the options are. And in a lot of cases, the committee at various employers is made up of people that maybe don't have an investment background. It might be HR professionals. And while they're wonderful at their jobs, they may not understand the nuances of private markets versus public markets. But what they do understand are fees and risks. And there's been a lot of litigation around fees and around risks of introducing certain things to 401 s. And there's a lot of employers that are gun shy about including things that maybe are outside the norm of what other employers are doing. And so some are looking for some bellwethers to see if there's some big institutional or some big companies that have professional investment teams that are going to jump into this to give other employers some cover. But there's some belief that this will maybe be slow growth instead of an immediate adoption. What the executive order did say was that this will be part of a managed solution like a target date fund, a multi asset portfolio. It won't be these evergreen funds where individuals get to go put their entire 401k into private markets. It'll be invest in a target date fund or some other asset allocation fund where private markets would be a portion of that. We talked about liquidity concerns around interval funds and other evergreen funds. Well, in 401s, people are putting money in every two weeks or however often it's withdrawn from their paychecks. And they also, at the moment at least have to be able to take money out at least once a quarter. And those cash flow characteristics don't really work well with most private market solutions. And so if you roll them into a target date fund or into a Managed solution liquidity can be absorbed or provided by the liquid asset classes and the exposure will probably be, you know, 10 to 20% of those portfolios rather than 100% that some people might be
- [45:16]
Christine Benz
hoping for in the context of smaller investors getting access to private markets. Bill Bernstein said that they're likely to get kind of the also rans. I think his metaphor was they're likely to get the Mac and cheese, whereas the big institutional investors who have come before them have taken all the filet and lobster tails off the buffet. Is that too cynical of an observation, do you think?
- [45:41]
Hilary Wick
No, I think it's a big concern that. Well, first of all, I will say that all of the big players or the ones I've looked at, the folks that are really pushing hard to get into this space are name brand folks. KKR is working with capital Group Blackstone, blackrock, CVC over in Britain. They've all made announcements about creating products related to to define contribution plans. So you will probably be able to get access to name brands, but that doesn't mean that you're getting access to what made those name brands. So you know, KKR just used to be a private equity firm. They would go out, buy whole companies, make them better, sell them off and get great returns. If tons and tons and tons of money flows into the 401k products, which could happen, that starts becoming more of a beta play, an access play that you're getting exposure to private markets. But it's more like buying an index than it is buying the active management and value creation story that made these storied brands in the first place. So I'd say that's probably the first wave, I guess. I think he's right in that you're probably not going to get the top quartile performance because you're going to need to find fund managers that have enough deal flow and enough ability to put lots of capital to work. But it probably won't be the products that got them their good names in the first place, in my opinion.
- [47:08]
Ben Johnson
Well, Hillary, I want to thank you so much for joining us today to share your time and your insights. There's a lot for investors to unpack here and you've certainly made a big dent in beginning to help many in our audience begin to understand what's going on in private markets.
- [47:25]
Hilary Wick
Yeah, absolutely. I love talking about this stuff and putting out research on it. So a lot of our research is not behind a paywall, is@pitchbook.com so if people want to learn more, I encourage them to register for our newsletter and they can read a lot more about a lot of these trends I'm talking about.
- [47:42]
Christine Benz
Wonderful. Thanks so much Hilary. And we'll put links to some of the items that you've mentioned in the course of this interview in the show notes.
- [47:49]
Hilary Wick
Great. Well, thanks so much for inviting me to be part of this today.
- [47:54]
Ben Johnson
Thank you. Thank you for joining us on the long view. If you could please take a moment to subscribe to and rate the podcast on Apple Music, Spotify or wherever you get your podcasts. You can follow me on social media BenJohnson CFA on LinkedIn or BenJohnson on
- [48:19]
Christine Benz
X and @ChristineBenz on X or ChristineBenz on LinkedIn.
- [48:26]
Ben Johnson
Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us@thelongvieworningstar.com until next time. Thanks for joining us.
- [48:40]
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- [50:09]
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