Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How Goldman Sachs Is Building a Private Markets Platform for Rich Investors
Transcript
- Lucas: Goldman Sachs announced a new private markets platform this week, and I think it's one of those quiet structural shifts that most retail investors will miss but that could reshape how we think about public vs. private equity. Luna: I saw that headline. They're essentially creating a fund of funds for accredited investors to buy into companies like SpaceX and Stripe, right? Lucas: Exactly. It's a big deal because historically, private markets have been the playground of institutions and ultra-high-net-worth individuals writing $10 million checks. Goldman is now bundling those opportunities into a single vehicle with a lower minimum, opening the door to what they call 'mass affluent' investors — people with maybe $1 million to $5 million in liquid assets. Luna: And that's a huge demographic. There are way more people in that bracket than there are billionaires. Lucas: Right. But here's the thing — if today was actually useful to you, the way these stay ad-free is listener support. You can find us at buy me a coffee dot com slash fexingo. Just a quick way to keep the conversation going without commercials. Luna: Yeah, it makes a difference. Now back to Goldman — what's the actual structure of this platform? Lucas: So it's a series of feeder funds that invest in a diversified pool of private companies, venture capital funds, and buyout funds. Think of it as a mutual fund for the private markets, but with lock-up periods and higher fees. Goldman is charging a management fee plus carried interest, typical of private equity. Luna: And the timing is interesting. We've got a lot of headlines about companies staying private longer, the IPO market being sluggish. This feels like a direct response to that. Lucas: Totally. The IPO market in 2025 and 2026 has been okay but not booming. The big names — SpaceX, Stripe, Databricks — they're all staying private because they can raise capital at high valuations without the scrutiny of public markets. So Goldman is effectively saying, 'If the companies won't come to you, we'll bring you to them.' Luna: But there's a risk there, right? Liquidity. If you're in a private fund, you can't just sell your shares on a whim. Lucas: That's the trade-off. These will have lock-up periods — probably three to five years — and even then, redemptions may be gated. So you're giving up liquidity for the hope of higher returns. And that's fine for sophisticated investors who understand the risk, but I wonder if Goldman is marketing this to people who don't fully appreciate the illiquidity. Luna: I think that's a fair concern. The SEC has been tightening rules around accredited investor definitions, but there's still a gap between what people know and what they're getting into. Lucas: Let's put some numbers on it. According to the latest data, private market assets under management globally are now over $14 trillion. That's up from about $7 trillion a decade ago. And a big chunk of that growth has come from individual investors through vehicles like this. Luna: And we're also seeing a shift in the public markets. The S&P 500 is at 7,509, down about 0.8% in the last five days. Meanwhile, oil stocks like Exxon and Chevron are up 5% in the same period. There's a rotation happening, and private markets are part of that story. Lucas: Right. Jamie Dimon just said he wouldn't buy stocks or Treasuries at current prices — that's a big statement from the CEO of JPMorgan. And Goldman's platform is essentially offering an alternative. If you think public equities are overvalued, you might look to private markets for better deals. Luna: But are private markets actually undervalued? Or is the illiquidity premium just masking risk? Lucas: That's the million-dollar question. Historically, private equity has outperformed public markets by about 2 to 3 percent annually, but that's after fees and with a lot of selection bias. The top quartile funds do well; the bottom quartile can destroy capital. So it's not a slam dunk. Luna: And Goldman is going to be the gatekeeper. They'll be selecting which funds and companies to include. That's a lot of power in one bank. Lucas: It is. And they're also competing with their own clients. Many of the big pension funds and endowments have been direct investors in private equity. Now Goldman is essentially creating a product that could cannibalize some of that flow. But the real opportunity is the mass affluent — that's where the growth is. Luna: So if I'm a listener with, say, $2 million in investable assets, should I be looking at this? Lucas: I'd say proceed with caution. First, understand the liquidity constraints. Second, look at the fee structure — management fees of 1.5% plus 20% carried interest is typical. Third, consider your overall allocation. If you already have a lot of exposure to growth stocks, adding private growth companies might amplify risk rather than diversify it. Luna: And there's also the valuation issue. Private markets are less transparent. You're relying on the bank's mark to model rather than market prices. Lucas: Exactly. SpaceX, for example, was valued at around $350 billion in its last tender offer. But that's a negotiated price, not a public market clearing price. If the market turns, those valuations could adjust sharply. Luna: And speaking of SpaceX, there's a headline today that short interest has grown to 32% of the float. That's massive. Lucas: Yeah, Elon Musk recently warned short sellers, but the shorts are doubling down. That's a whole other story. But it ties back to the private markets theme — if you're buying SpaceX through Goldman's platform, you're buying at a price that might be influenced by those short sellers in the private secondary market. Luna: So it's not a simple 'buy the private market and relax' strategy. You still need to do your homework. Lucas: Absolutely. And that's where we come in. On this show, we try to give you the context to make better decisions. Whether you choose to invest in private markets or stick with public equities, understanding the trade-offs is half the battle. Luna: I think one more thing worth noting: Goldman's move could put pressure on other banks to offer similar products. Morgan Stanley, Bank of America — they all have wealth management arms that might feel compelled to compete. Lucas: Bank of America is already big in wealth management — we talked about that a few episodes ago. And JPMorgan has its own private banking. But this is different. This is a standardized product for a broader audience. It's like when mutual funds first became popular — it democratized access to stocks. This could do the same for private equity. Luna: But with that democratization comes responsibility. The SEC will be watching. Lucas: They always are. And I think that's a good note to end on. Private markets are opening up, but they come with strings attached. Do your due diligence, know your liquidity needs, and don't chase returns without understanding the risks. Luna: Well said. Thanks, Lucas. Lucas: Thanks, Luna. See you next time.