Investors continue to have a robust appetite for private markets that either matches or exceeds last year’s sentiment, according to the Goldman Sachs Alternatives 2025 Private Markets Diagnostic Survey. More than 250 investor clients across asset and wealth management and general partners on its external manager platform for wealth and institutional clients participated in the survey.
The optimistic findings come amid a wave of concerns affecting the sector, such as a long-running liquidity crunch and recent bankruptcies of large lenders.
Investors are particularly optimistic about infrastructure and real asset strategies more generally, with conditions ripe for private sector spending. Investor sentiment about real estate showed the biggest improvement, a good sign after five tough years in the sector.
Jeff Fine, global head of real estate client solutions and capital markets at Goldman Sachs Asset Management, told II that “the surprise takeaway is that, despite widespread concerns around lack of distributions and DPI [distributed-to-paid in capital], investors, year over year, are still looking to deploy, and on the margin are looking to deploy more,” he said. “The narrative is that because capital is not being returned in existing funds no new commitments are being made, but that certainly didn't come through.”
Fine added that the number one concern of international clients is geopolitical conflicts.
But “inflated valuations were the top concern for U.S. investors. That's an expression of skepticism in terms of where things are being held and the translation of that in terms of deal activity, which has obviously been quite depressed from market highs.”
Fine said the data suggests clients are starting to work past valuation concerns and increased M&A and new IPO issuance indicate that “commercial activity is picking up.”
Investors are continuing to concentrate new commitments to existing managers that have performed well, he added.
Investors are selectively adding new managers that meet their criteria, such as the right fee structure, a good track record, team stability, and demonstrated expertise in certain specialty sectors.
The data shows that the secondary market is active, with motivated sellers looking to rebalance portfolios and accept discounts to funds' net asset values. Continuation strategies are also popular.
“You are going to see managers starting to sell assets, and they will likely start with their better assets, whether through continuation, recapitalization, or outright sales,” said Fine.
But “managers are under increased pressure to create liquidity after so many years for their clients. If it doesn't happen naturally through the markets you will see some managers facilitate distributions again through partial recapitalizations,” he said.
Fine said that as a result managers are increasingly using hybrid capital to help “engineer distributions” as they look to fill capital structure voids.
Alternatively, they could use that type of money to create distributions to the investors who are demanding it. This is an expensive way for managers to fill out the capital stack, he said, but does mean they get to hold on to the assets, continue collecting fees and generate a distribution for investors, he said, adding that while it may erode the multiple it will also serve to increase DPI.
