Private Markets, Public Signals — Mobile Infographics Report
A quick visual brief on why alternatives are lagging, how banks are repositioning, and where tokenization fits.
Quick Summary
- Alternatives face a near-term valuation reset despite long-term secular growth stories.
- Private credit’s edge is long-duration liabilities matched to long-dated assets; optics suffer when spreads tighten.
- Private equity’s monetization “clock” slowed; LPs want distributions while exit markets normalize.
- Traditional active managers still see fee and flow pressure; scale and ETF capability matter.
- Banks with flexible duration and capital-light fee engines are better positioned.
- Tokenization likely transforms back-office rails first, then unlocks new access in illiquid assets.
Macro Paradox: Calm Spreads, Anxious Prices
Contradiction highlights uncertainty about the private vs. public risk gap and opacity in non-traded loans.
Private Credit — What to Check
Private Equity’s Clock
| Phase | Low-Rate Era | Now | Implication |
|---|---|---|---|
| Deploy | Fast, cheap leverage | More selective entries | Lower MOIC risk if overpay |
| Improve | Multiple expansion tailwind | Ops-heavy value creation | Execution drives returns |
| Exit | Open M&A/IPO windows | Windows uneven | Longer hold periods |
Bottom line: patience + operational playbooks matter more than ever.
Traditional Asset Managers — The Fee Squeeze
Secular Pressures
- Indexing & ETFs commoditize beta at ~0–15 bps.
- Active underperformance compresses fees.
- Legacy funds create a “back-book” drag.
Countermoves
- Build ETF franchises & active ETFs.
- Expand SMA and model portfolios.
- Acquire private‑markets capabilities.
Banks — Strategy Signals
- Know-your-core: double down where moat and margins are durable.
- Tech spend must improve STP, data quality, and controls.
Tokenization — Practical First Steps
- Back-office first: toward real-time clearing, better audit, lower friction.
- Illiquid assets next: standardized cash-flow tokens for real estate, infra, revenue shares.
- Business-model impact: less float, more interoperability; fees migrate to value‑add.
Watchlist — Next 90 Days
- Realized loss rates in private credit by sector and vintage.
- PE exit pace: M&A vs IPO vs secondaries; discount to last round.
- Active vs ETF flows and fee capture by channel.
- Bank NII guides tied to duration roll-off schedules.
- Regulator-approved tokenization pilots in real‑world assets.
Private Markets, Public Angst: Why the Alternatives are Lagging
By [Your Name]
The world of finance is swirling with paradoxes. Some of the largest, most go-to firms in private markets—firms with marquee names, reputations for growth, for innovation—are seeing serious stock price drops. Meanwhile the broader equity markets are at all-time highs. What gives?
That’s the question posed by Steve Eisman in his recent interview with Glenn Schorr, a veteran analyst covering major financial institutions, asset managers and private-market behemoths. Schorr’s answers trace a winding story—one that takes us from private credit to global banks to the fundamentals of asset management. For institutional investors, this may be one of the most important conversations of the year.
Here are the major takeaways.
Ugly (but evolving): Alternatives under pressure
Schorr begins by labeling the alternative asset-manager sector as “ugly” in the near term—even if the long-term value remains intact. Firms like Blackstone Group (-15 %), KKR & Co. (-21 %), Apollo Global Management (-25 %), and Owl Rock Capital (-33 %) are seeing meaningful declines in an otherwise rising market. (Numbers per Eisman/Schorr transcript.)
What’s especially confounding: these alternatives are raising ever more capital, expanding their businesses, and touting secular growth narratives—yet their stock prices are heading in the opposite direction.
Why? Schorr offers several building blocks of an explanation:
- We’re still in the question-phase of a credit/capital-cycle shift. While the public markets (e.g., high-yield spreads) are benign, the private credit world has more uncertainty baked in.
- Many private-market businesses are built on long-duration liabilities and leveraged credit exposures, and that becomes a risk when interest-rates, leverage, or credit quality shift.
- Exit volumes (monetisations) in private equity have been delayed by the M&A/IPO drought that followed the rate-shock of 2022. That delays returns to Limited Partners (LPs) and frustrates the monetisation timeline.
- Active asset-managers face secular headwinds from indexing/ETFs; traditional fee pools are under pressure; multiples are compressing.
In short: the industry that thrived on “non-correlated returns”, “closed-end funds”, “private markets alpha” is now showing its vulnerabilities.
“If you want to keep paying 60× for the Mag Seven, just buy the Mag Seven. Private equity still holds a strong piece… but it depends what your time horizon is.”
— Glenn Schorr (via transcript)
The credit paradox: private vs public
A notable tension in the discussion is the contradiction between public-credit markets and private-credit markets. Schorr notes: the high-yield spread is tight (a sign of credit optimism). Yet private credit firms are being treated as if the risk is rising.
Schorr describes the logic thus:
- If public credit spreads are tight, the market is comfortable with credit risk.
- Yet if stocks for private-credit managers are falling, maybe there’s concern that private deals are riskier than publicly syndicated ones.
- One possibility: private credit exposures (direct lending, leveraged loans to sub-investment grade firms) simply bear more latent risk—operational, structural, liquidity‐wise—than the public market assumes.
He offers some comfort: banks and asset managers in the public sphere continue to say no evidence yet of a credit-cycle turn. Insurance and private-credit participants say they don’t see a full “turn” either. The implied message: increased loss rates may happen—but not a major crisis… yet.
Yet for investors, the implications are already being priced: the alternatives stocks are down for this reason.
Private equity’s tailwinds are becoming headwinds
Even traditional private equity (PE) is under strain. Schorr highlights:
- PE funds bought companies believing rates could stay low for the long term. Then came the sharp rise in interest rates and a slowdown in the exit markets.
- A typical private equity fund would run for ~10 years, deploy capital in years 1–4, then monetize in years 5–10, returning ~2×–2.5× invested capital (MOIC). (Again, per Schorr’s remarks.)
- Today, the exit timeline is stretching: some monetisations that would have happened by year 8 are now moving toward year 10–13. That means LPs are locked up longer.
- Cash-flow demands on LPs (pension funds, endowments) remain real—they need distributions. If those distributions don’t arrive on schedule, asset-allocation stress arises.
In the scramble for liquidity and return, firms like KKR stand out because they have consistently returned capital to investors and have strong “dry powder” to deploy. That’s why Schorr cites KKR as a favourite in the group.
On the flip side, some public alternative asset managers are struggling because their return-of-capital metrics are weak, or they have funds that fall near—or below—the hurdle rates that trigger incentive fees.
The kings of private credit: Apollo & friends
When discussing private credit, Schorr singles out Apollo as a pioneer. Key points:
- Apollo helped articulate that the “superpower of asset management” is long‐duration liabilities (like insurance float or private pensions) matched with long‐dated assets.
- These firms are financing infrastructure, data centres, digital infrastructure, large projects—not simply making loans to middle-market sub-IG companies.
- That business model is arguably healthier for the financial system (less leverage, longer duration, better alignment) than banks making long loans on short deposits.
- However: recent results show headwinds. Apollo’s “surplus spread” earnings (from its insurance business) have disappointed—growth in the 5 % range this year versus “double‐digit” expectations.
- And investors worry: if the credit cycle worsens and losses accelerate, these firms’ balance sheets—they own the loans directly—could be vulnerable.
Schorr’s view: he likes the business model, believes in private markets for diversified portfolios and real alpha—but acknowledges the short-term execution and sentiment risks remain elevated.
The good: banks, asset & wealth managers
Shifting focus, the conversation moves to large banks and asset/wealth managers. Two names stand out: Goldman Sachs Group and Citigroup Inc..
Goldman Sachs: Schorr acknowledges that the bank’s reputation had taken a hit, but under CEO David Solomon the firm has pivoted:
- The firm attempted a big consumer-lending push (Apple credit card, online deposit business) in part to reduce cyclical exposure and secure more stable deposit funding.
- That strategy didn’t work out as hoped—Goldman has pulled back, and Solomon acknowledged companies must take chances—and prune what doesn’t work.
- Going forward: Goldman is focusing on being “an even better Goldman”—reducing capital intensity, emphasizing asset & wealth management, investing where they’re already strong (investment banking, capital markets, trading) and scaling wealth/asset management.
- The analogy is: maybe Goldman is becoming more like Morgan Stanley—which the analyst cites as having pivoted successfully towards wealth management (with ROE ~23% vs bank peers ~15%).
Citigroup & CEO Jane Fraser: Schorr believes Fraser has done a bold and effective job in repositioning Citi:
- When she took over, Citi’s strategy was sprawling: global retail banking in many countries with 1–2 % market share, multiple weak sub-businesses, a regulatory mess.
- Fraser has pared the business down—exited non-core geographies, refocused on global treasury/payments (a high-return, capital‐light business), cleaned up systems and regulatory standing.
- Result: Citi is among the best performing large bank stocks this year (up ~40 + %).
- But Schorr is cautious: while Citi now has one truly strong business (global treasury/payments), the other three (investment banking, U.S. retail, credit cards) are still underperforming, and the company must raise its returns and scale those segments meaningfully for the repositioning to pay in full.
Traditional asset managers: the bad
Finally, Schorr turns to what he calls the bad: the large, publicly-traded asset managers built on the traditional active mutual fund model (excluding the giants of private markets and excluding firms like BlackRock Inc., which stands apart). His points:
- In the mid-1990s, mutual funds were growing fast. Only ~5% of U.S. households owned a mutual fund in the mid-80s; by the late-90s it was ~50%. That kind of “penetration growth” fueled high multiples (20-25× earnings).
- Then came indexing and ETFs. Technology advanced. Active managers found it harder to beat benchmarks, fees compressed, asset outflows accelerated.
- For years, U.S. mutual-fund industry has lost roughly US$300 billion per year in net outflows. ETF industry has captured much of that.
- As a result: multiples for active managers compressed to single digits (≈9-10× earnings).
- Some companies (e.g., Invesco Ltd.) have tried to transform: build out ETFs, expand abroad, acquire smaller players, enter SMA (Separately Managed Accounts) platforms, tilt toward private markets exposure. The legacy back-book still drags.
- The broader message: many traditional asset managers failed to foresee the shift, or were slow to adapt. Meanwhile private markets firms did adapt (albeit with new risks).
Tokenization: the next frontier?
One of the more interesting sideline topics is tokenization, which Schorr addresses with relative simplicity—but with important implications.
Tokenization refers to digitizing ownership or cash-flows of assets (stocks, bonds, building rent-roles, infrastructure etc.) via tokens on a blockchain or distributed ledger. Key points:
- At its core: tokenization can make settlement, liquidity, clearing far faster (real-time), reduce reliance on back-office legacy systems (T+3 → T+2 → T+0), improve safety/soundness, reduce friction.
- For consumers/equities/bonds, tokenization may not feel materially different right now, because we already trade stocks in seconds. But for private/illiquid assets, infrastructure, global payments, cross-border flows—tokenization could be transformational.
- Banks make money on “float” (the gap between when they receive deposits and when they pay out). If settlement is instantaneous and float disappears, banks’ business models are challenged.
- Meanwhile, digital wallets, stable-coins, tokenized assets, 24/7 global trading: these are emerging pressures on the traditional financial plumbing.
- Schorr’s view: tokenization is meaningful—but like many innovations, the real payoff may be long-term, not tomorrow.
Pulling together: what does this mean for investors?
From Schorr’s wide-ranging discussion, several interconnected themes emerge:
- Time horizon matters. Alternatives (private markets) may still be compelling—but investors must accept longer-locked up capital, slower monetisations, structural risk (liquidity, leverage, fallback to public markets).
- Growth is not enough. Firms raising capital, expanding business lines, touting secular stories can still see stock declines if the market doubts execution, return of capital, or durability of the model.
- Credit is the under-the-radar battleground. While public credit looks fine, private credit’s hidden risks—direct illiquid loans, lack of transparency, higher leverage—may be creating latent concerns.
- Transformation is ongoing. Large banks and asset managers are rethinking strategy: deposit-funding models, asset/wealth management expansion, technology transformation, cost base resets. In the current environment, those who are pivoting effectively may be winners.
- Market structure is shifting. Tokenization, digital wallets, 24/7 global trading, faster settlement—these are structural forces that may reshape competitive advantages in finance over the next decade.
- Valuation matters. Ironically, when capital is abundant and growth is assumed, multiple expansion is easy. When growth slows or execution is questioned, de-rating happens quickly (e.g., asset managers).
- Selectivity is crucial. For example, Schorr singles out KKR for its strong capital-return track record, and cites Apollo favourably for its long-duration liability model (even as he warns of short-term headwinds). In contrast, he’s wary of traditional active managers who’ve lagged the structural shift.
My editorial take: navigating the crossroads
As an observer (and advisor) of investor capital, I’d draw from Schorr’s insights a few actionable thoughts.
First, for institutions that rely heavily on alternatives private markets (pension funds, endowments), the current environment is a significant inflection point. The “golden era” of private equity (low rates, high exit multiples, short monetisation cycles) has faded. Going forward, fiduciaries must manage expectations: longer capital drawdown periods, slower exits, perhaps lower multiples. The vintage of new funds should be calibrated accordingly.
Second, public markets (banks, asset managers) are offering a clearer risk-return profile for many investors. The unpredictability of private markets—liquidity risk, opacity, timing risk—pushes many to ask: why give up liquidity unless the premium is meaningful? Firms that are re-tooling themselves (Citi, Goldman) may offer more predictable outcomes.
Third, thematic change—especially tokenization and digital finance—is real but under-appreciated. While many talk about “Web3” and “crypto” in leaps and bounds, the more practical financial plumbing innovations (tokenized securities, 24/7 settlement, digital wallets for institutions) may quietly reshape competitive advantage among incumbents. Investors who under-write these shifts early may gain asymmetric returns.
Fourth, fee-model disruption is far from over. Traditional asset managers charging fees for active management face secular headwinds. Passive/ETF models plus the rise of private markets raise serious questions about the value proposition of high-fee active firms. Investors need to allocate carefully, avoid fee traps, and demand true alpha.
Fifth, market timing matters less than business model resilience. Alternative firms once benefitted from a benign cycle (rising valuations, low rates, plentiful exits). Now, the environment is tougher: higher rates (raising cost of capital), slower exits, compressed valuation expansion. The firms that can show durable returns of capital, resilient business models, and diversified revenue streams—rather than purely “growth” stories—will survive and thrive.
Where to go from here: questions investors should ask
If you’re reviewing managers, funds or financial-sector stocks in light of these themes, here are some questions worth asking:
- For alternative/private-market firms: What is the expected timeframe for monetisation? Are exits accelerating or delaying? What is the multiple of invested capital (MOIC) being achieved recently vs prior?
- What is the liability structure (duration, leverage) of the firm? Are they exposed to short-duration liabilities funding long-duration assets (a classic mismatch)?
- For credit‐oriented firms: What is the expected loss rate? How levered are the underlying borrowers? How transparent are the assets? What is the secondary market liquidity?
- For large banks: What is the deposit-to‐loan mix? Are they sitting on long‐duration fixed-income portfolios that will mark down if rates stay higher? What is their cost of funding? What is their exposure to consumer/lower-credit segments?
- For asset/wealth managers: What portion of AUM is active vs passive? What are the growth trends in fee-earning segments? Are they building sustainable businesses (e.g., wealth, private markets) or reliant on decaying legacy flows?
- For tokenization/digital asset ventures: What real assets are being tokenized (infrastructure, real estate, private equity stakes)? What is the regulatory framework? What is the liquidity profile of the tokens? Is this just a marketing story or is the underlying architecture being built?
- Across all: How is management aligning with shareholders? Are they returning capital (dividends, buy-backs, exits)? Are they raising opaque new funds and just layering fees on capital? Are their incentives aligned with LP/stockholder outcomes?
Final thoughts
The interview between Steve Eisman and Glenn Schorr pulls back the curtain on an industry at a crossroads. The private-markets superstars of the last decade—alternatives firms, direct‐lenders, private-equity giants—face a tougher environment. The complacency of rising capital, ever-increasing multiples and liquidity risk is giving way to scrutiny, delay, and repricing.
At the same time, large banks and asset/wealth managers that are smartly pivoting may offer clearer investment opportunities. And structural change—tokenization, digital finance, faster settlement—remains an underappreciated driver.
For investors, navigating this landscape means looking beyond growth headlines, digging into business models, aligning time-horizon expectations, and demanding transparency. The “good, bad, ugly” framework Schorr offers is a useful lens—but the real work is in distinguishing which firms are adapting vs merely hoping they can ride the last cycle.
In a world of compressed returns, heightened uncertainty, and structural disruption, the companies that win will be those that show disciplined execution, align with investor interests, and embrace transformation rather than resist it. For those willing to do the homework, the opportunities are there—but so are the risks.