The Long View: Hilary Wiek - Perspective on Private Markets

Key Concepts

• Evolution of Private Markets: A shift from traditional drawdown funds to more liquid “evergreen” funds, driven by changing investor needs and capital flows.
• Performance Measurement Challenges: The complexities of comparing private market (IRR) and public market (TWR) returns, and the importance of using PMEs for accurate evaluation.
• ESG & Impact Investing Growth: Increasing focus on ESG factors and dedicated impact investing funds within the private market landscape.
• Private Market Access for Retail Investors: The push to integrate private markets into retirement plans, particularly 401(k)s, through managed solutions.
• Current Market Headwinds: Geopolitical uncertainty, fluctuating interest rates, and fundraising slowdowns are creating challenges in the private market.
• Importance of Due Diligence & Research: Qualitative manager research and access to reliable data (like PitchBook’s) are crucial for navigating the private market.

Private Market Evolution & Access (Parts 1 & 2)

The discussion traces the evolution of private market access, moving from traditional “drawdown funds” – where capital is committed but deployed over time – to “evergreen” funds offering semi-liquid characteristics like those found in “interval funds.” This shift is driven by declining institutional capital and a desire to reach individual investors through defined contribution plans. While offering increased access, caution is advised regarding the performance of evergreen funds, as they may deliver “beta” exposure rather than active value creation. The involvement of major players like KKR and Blackstone in creating products for defined contribution plans demonstrates the growing interest in this space, potentially allocating 10-20% to private markets within target-date funds.

Current Market Dynamics & Fundraising (Part 1)

Heading into 2026, the private market is facing headwinds despite a pickup in deal activity following a slowdown in 2021-2022. Europe is currently showing slightly more deal activity than the US. A key driver of the slowdown in fundraising is a lack of distributions to LPs, as funds are holding onto portfolio companies longer, limiting their ability to re-invest. Market uncertainty and the decline in institutional investors are also contributing factors. GPs are increasingly utilizing “continuation funds” to extend investment timelines and provide liquidity to LPs.

Performance Measurement & Benchmarking (Part 1)

Accurate performance evaluation in private markets is complex. The discussion emphasizes the critical difference between Internal Rate of Return (IRR) – commonly used for private market funds – and Time Weighted Return (TWR) used for public markets. IRRs tend to be higher but are not directly comparable to TWRs. For a more accurate comparison, the use of Public Market Equivalents (PMEs) is recommended. It’s important to remember that, for long-term private market investments, quarterly marks shouldn’t be overly scrutinized.

ESG & Impact Investing (Part 1)

ESG considerations are increasingly important, with a distinction made between broad ESG integration (improving any company) and impact investing (targeting specific positive outcomes). PitchBook tracks over 5,000 private market funds with an impact focus, reflecting the growing interest in this area. Hillary Wick’s experience managing impact and ESG investments at the St. Paul in Minnesota Foundations illustrates the practical application of these principles.

The Role of LPs & GPs (Part 1)

The relationship between Limited Partners (LPs – investors providing capital) and General Partners (GPs – fund managers investing the capital) is central to understanding private market dynamics. GPs will need to demonstrate a robust “deal flow” – a consistent stream of potential investment opportunities – and the “ability to put lots of capital to work.” Interestingly, the fund managers best equipped for this task may not be those who have historically excelled in the strategies that initially built their reputations, suggesting a shift in required skillsets.

Resources & Disclaimers (Part 2)

PitchBook is presented as a key resource for investors, with a significant amount of research available at pitchbook.com, and further analysis accessible through their newsletter. The segment concludes with extensive disclaimers emphasizing that the content is “for informational purposes only and should not be considered investment advice.” Morningstar does not guarantee the accuracy or completeness of the data presented, and listeners are advised to consult with financial and tax professionals before making investment decisions, acknowledging the “possible loss of principle.”

Conclusion

The discussion highlights the evolving landscape of private markets, driven by increased access for retail investors and a growing focus on ESG factors. While opportunities exist, navigating this space requires a thorough understanding of performance measurement nuances, careful due diligence, and access to reliable research. The current market faces headwinds, emphasizing the importance of partnering with skilled fund managers and recognizing the inherent risks associated with private market investments.