Goldman's Olson: See Private Credit Flows Slowing

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00:00When we talk about the interest in private markets, we know this is an industry that has

00:04grown exponentially over the last few years. But this is like the first time in the last year or

00:08so where I think other than the ultra, ultra high network individuals, where a much broader class

00:14of people are getting access, or at least they want access to this area. Where does that growth

00:19come from within that space? Sure. So obviously, we're seeing a lot of interest by individuals

00:24in getting access to alternatives. Conversely, we're seeing a lot of interest by alternative

00:28asset managers and getting access to and tapping into that vast amount of individual wealth.

00:33And so what you've seen over the last one year, but I'd say the last five years is incredible

00:36innovation in terms of providing broader access to individuals, new structures, new wrappers

00:43that are allowing individual clients who usually weren't able to get that access to tap into

00:48private equity, private credit and real assets. Well, let's talk about the private equity, private

00:53credit side, because to a certain extent, there has been better access to real assets to varying

00:59degrees. But private equity and private credit, to a certain extent, were closed off for a large

01:03number of people. How are they approaching this, not only from the potential returns that they can

01:07get, but also dealing with the reality of liquidity issues? Sure. So I think private equity is a place

01:13where we've been really focused and very constructive. It's the largest allocation for us within the

01:17alternatives allocation. And I think if you look historically at the data over decades, private

01:22equity has been able to generate five, 600 plus basis points of outperformance to global equity

01:28markets. Now, if you measure that on a shorter period of time, that obviously narrows because it's

01:32been hard to beat a market that's been up and to the right for the last five years. But that brings back

01:38to kind of really focused on manager selection, right? Because in alternatives different from the public

01:43markets, you really don't want to own the index. You want to own first and top crypto managers. If you

01:48do that, you're going to be rewarded. So I think what we think about it is, what is that extra return,

01:54that alpha that you can get relative to the liquid alternative of public equities or public fixed

01:59income? And I think by and large, that's been persistent and clients have been pleased with the

02:04returns that they've seen. The question about the zeitgeist when it comes to private credit. So we

02:08emerged from last year with this kind of moment of market entomology, Jamie Dimon talking about

02:13cockroaches and I think spooked a lot of people. How has that kind of rippled out? What effect is

02:18that having on clients' appetites for private credit going into 2026? Yeah. So I think we're

02:23going to see stability and we're going to see resilience and appetite for private credit.

02:27You know, look, when the move into this direct lending space by individuals started and by the

02:31broader market, you know, returns and yields were double digit, right? They've come down, right? But even at

02:36eight, nine percent, that's still going to outperform what you're going to get in the public markets.

02:43I think the impact that you're seeing cockroaches and some of these idiosyncratic things that happened

02:47at the end of the last year do create some sentiment shift. So I think you do see flows slowing a bit

02:53into private credit and you may see a slight pickup in redemption activity. But what's interesting is

03:00it's based more on the headlines than it is on what we're actually seeing under the hood, which has

03:06actually been relatively low defaults. We haven't seen an increase in defaults. And again, back to

03:11vendor selection, I think that if you pick the right managers that can pick the right credits, you're

03:16going to be rewarded in the long run. And as we go into 2026, if we pick up, see a pickup in deal

03:20activity, that's going to create new opportunities for direct lending. Is the regulatory landscape a risk

03:25here as you look at sort of what the first year of the president's second term has been like when it

03:29comes to regulation, the way that he's approached it and the way the regulators have approached it?

03:33Is it something that clients, investors should be worried about when it comes to these spaces that

03:37aren't as heavily regulated as say the banks or other financial institutions? Well, look, I think

03:41some of the easing of regulation is actually what's helping to open the aperture to a broader universe

03:46of investors. So it's actually allowing them to get a foot in the door. I think what's important,

03:51we talk about this a lot when you go to individual investors going into less liquid asset classes,

03:55which have a lot of different features that they're not used to, is how does the

03:59industry educate the individual investor about risks that they've never thought about, whether

04:04it's illiquidity, different fee structures, right? All the different things that they don't have to

04:09think about in their traditional 60-40 portfolios. I mean, some of the concern that's been expressed,

04:13it seems to be, it's less on, of course, some of the more customized stuff and the SMA type stuff,

04:17but the idea that you're going to have a lot of people with 401ks looking at their offerings and then

04:21just making, you know, potentially an uninformed decision about allocating there. And I am curious as to

04:28just in terms of how you pitch products at Goldman Sachs to your clients or through advisors,

04:34how do you sort of address that issue of education that there are people that aren't going to get

04:38that customization? They're going to have to have maybe not necessarily the index, but certainly

04:42something that's a little bit more one size fits all. Yeah. And I think that's okay to have,

04:46you want diversification, right? You might want a solution that covers a number of different ways that

04:51you implement. But I think the important thing about education is even at a high level,

04:55which is, and this is one of the things on the new structures we talk about for individual

04:59investors is while they have features that seem like quarterly liquidity, just that basic education

05:05that that liquidity though might not be there if you read the fine print when you actually need it.

05:10And so it's, it's a really high level of education or reminding them that, that this isn't a liquid

05:15asset class. And your mindset on this in terms of how long you should be in this should be very long.

05:20And actually one of the beauties of retirement and 401k is that's the place where you have the longest

05:25duration. So in some ways, alternatives make a lot of sense for investors that are young and thinking

05:31about their retirement decades away.

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