November 12, 2025 • 51 mins
Barry speaks with Kristin Olson, global head of alternatives for wealth at Goldman Sachs. They discuss the alternate investing space. Kristen and Barry also discuss allocating money long-term and making alternatives more accessible to individual investors.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.
Speaker 2 (00:16):
This week on the podcast, I have an extra special guest.
Kristin Olsen is Goldman Sachs's global head of Alternatives for Wealth.
She's a self described Goldman Sachs lifer. She went to
the firm straight out of Georgetown twenty seven years ago.
Speaker 3 (00:33):
She's been running the Alts.
Speaker 2 (00:35):
Group for the past twenty four years. There aren't many
people in the world of either wealth management or alternatives
that are as knowledgeable and experienced as Kristin is. I
thought this conversation about everything from private equity to private
credit to real assets including real estate and infrastructure investing
(00:57):
was absolutely fascinating, and I think you will also with
no further ado my conversation with Kristin Olsen. Kristin Olsen,
Welcome to Bloomberg.
Speaker 4 (01:07):
Thanks for having me, Barry.
Speaker 2 (01:08):
Well, I've been looking forward to having this conversation. Alts
are obviously a super hot topic these days, but before
we get into that, let's talk a little bit about
your background. You arrived at Goldman Sachs directly from undergraduated Georgetown.
What led you to finance and what led you to Goldman.
Speaker 5 (01:28):
So I would say, you know, corraduating from Georgetown, I
actually wasn't sure what I want to do. I was
interested in corporate finance, but I was particularly drawn to
the idea of joining a big analyst class with great
training at one of the big investment banks. And then
I'd say I was fortunate enough through the in unity
process to land at Goldman Sacks and that turned out
(01:48):
to be a fantastic place to start my career in
investment banking in the Financial Institutions group.
Speaker 2 (01:55):
And you started as an analyst in investment banking, did
you go the whole CFA route one, two, and three.
Speaker 4 (02:02):
Nope, just two years.
Speaker 5 (02:03):
I got my CFA as an analyst at Goldman Sachs.
That was my that was my training, two years in FIG.
Speaker 2 (02:09):
And then how did you end up pivoting to ALTS?
It seems so different to go from transactional banking, especially
when you started heading right into two thousand.
Speaker 3 (02:20):
What was the appeal of ALT?
Speaker 5 (02:22):
Well, it's funny I didn't go directly into ALTS. It
took a little segue. So in two thousand, as a
third year analyst, I wanted to do something different. It's
hard to think. Way back then, that was the dawn
of the Internet, and you know, everyone was going to
work on different dot coms, different startups, and I took
a little bit of a safer route and decided to
work on the Goldman dot Com.
Speaker 2 (02:43):
Project, which is what which was really their own build
out of their own website exactly.
Speaker 5 (02:48):
That's how long ago it was, if you think about it,
we didn't have an online ability for our clients to
access their accounts, to trade stocks, to access information as.
Speaker 2 (02:58):
Late as two thousand, Hey maybe we should get a website.
Speaker 4 (03:01):
That was the start of it.
Speaker 5 (03:02):
And also thinking about what kind of business we could
evolve around self directed investors going to Goldman dot com
versus at that time, E Trades, schwab right, all the
online access that was happening, and so I decided to
spend my third year focused on that business endeavor, and
then that led right to the DOCM bubble bursting, which was,
(03:27):
you know, pretty much I was pretty much done with
my third year analyst program.
Speaker 4 (03:30):
I had a few more months.
Speaker 5 (03:31):
That was kind of February March of one, and so
when that happened, they went to the you know, US
poor third year analysts and said, you've got a few
more months on your program, why don't you move into
this investment management division at Goldman Sachs, which I knew
nothing about at the time. And you're going to interview
with a bunch of people. And it was sort of
a group interview. And this is funny, but.
Speaker 2 (03:53):
Meaning you with a bunch of people or what person
with a bunch of people.
Speaker 5 (03:57):
At a bunch of analysts? Wow, and funny story. My
mentor and longtime boss. I heard this after the fact.
We'll say I won Kristen and the analyst lottery or
the analyst draft. He drafted me. And I didn't know
anything about alternatives. I didn't know anything about investment management.
I didn't know anything about wealth management. And the seat
(04:17):
I got put into at the time was called our
Special Investments group. So that's what we called alternatives back then.
Special investment.
Speaker 3 (04:23):
Huh.
Speaker 2 (04:23):
Really interesting? And to be clear, Goldman has long had
a reputation as very savvy traders and very savvy participants
in public markets, and very very savvy in terms of seating. Hey,
we have this great trader, but he wants to leave
(04:43):
and start his own hedge fund. Let's be his prime
broker and let's see them and participate in the upside.
So I typically think of Goldman as a big public player.
This has been developing for you know, longer than you've
been there. What's the total assets that Goldman runs in
(05:04):
terms of privates.
Speaker 4 (05:06):
Over five hundred million dollars.
Speaker 3 (05:07):
That's real money.
Speaker 5 (05:08):
Yeah, I mean, I think it's one of the things
that people don't realize, which is you talk about going
back twenty seven years ago. We've had a private investing
business going back well over three decades wow, and over
five hundred million assets today. We are one of the
largest managers of alternative assets.
Speaker 4 (05:24):
So people don't know.
Speaker 2 (05:25):
So how has this space changed over the twenty three
twenty four years you've been working in.
Speaker 4 (05:33):
Alts incredibly, right?
Speaker 5 (05:35):
I mean I think if you thought about the expansion
of the different asset classes that sit under alternatives, right,
So that's a broad word that describes lots of different
types of strategies.
Speaker 2 (05:45):
Break it down for us, what are the key.
Speaker 5 (05:47):
You were starting with hedge funds, So that's one sector.
But if you actually think about where we focus more,
it's much more on the private side than the public alls.
So if you think about under that umbrella, it's private equity.
But again, under private equity, let's think about the different
strategies there, everything from buy out through growth equity, through
venture capital, then the advent up a big private credit
(06:09):
asset class with an alternatives right, and even within that
everything from direct lending to hybrid capital solutions to distress right,
all of that falls under this private credit bucket. And
then you have real assets, real estate, infrastructure, and so
the asset class has become much more mature and much broader.
And then obviously we've seen tremendous inflows over the last
(06:31):
two three decades, and it's.
Speaker 2 (06:33):
It's still a fraction of the size of the public market.
So I think that kind of gets lost in all
the enthusiasm. Well, it's relatively small compared to stocks, bonds,
or any other private.
Speaker 5 (06:46):
Exactly, Yet a lot of the economy is driven by
private companies, right, And so I think that's part of
the impetus right now as we see kind of the
aperture opening for alternatives to individual investors, right, is how
do you tap into other sources of growth in the
economy if you're only investing in public markets? Right? So
I think there's an imperative for a lot of investors
(07:06):
to learn more and start to invest in private markets.
Speaker 2 (07:10):
So some of the drivers of the growth in the
space are obviously privates are the majority of economic activity
in the country. At the same time, we've seen the
number of public companies shrinking between buybacks and mergers and
the limited number of IPOs, the total number of public
(07:31):
companies are becoming smaller as privates get bigger. I'm going
to ask you to speculate what might reverse that shrinkage
in the number of US public companies.
Speaker 5 (07:42):
Well, look, I think high quality, high growth companies are
many of them are still going to revert back to
the public markets, right, and hopefully we're starting to see
a pick up an IPO activity. I think you'll see
some of the marque growth companies, tech companies, AI companies
that need massive amounts of capital to fund themselves.
Speaker 3 (07:58):
There's no alternative to go back to.
Speaker 4 (07:59):
The IPO markets, right.
Speaker 5 (08:01):
But you've seen a lot of innovation in the private
markets to allow companies to say private for a lot longer, right,
And so I think average time to IPO now is
ten years. But what you're seeing the interim are secondary
funds doing things like continuation vehicles right to allow to
change the investor base but stay private for a.
Speaker 4 (08:20):
Longer period of time.
Speaker 5 (08:21):
There's just a lot more liquidity in private markets to
allow these companies to maybe not have to ever go
public if they don't want to.
Speaker 2 (08:28):
You know, it felt like in the nineties there was
this mad rush to go public, very often with flimsy
business models, clicks and eyeball stuff like that, And now
it seems like we've swung the pendulum completely in the
other direction, where there is no rush to go. But
at a certain point, some of these companies get so large,
(08:48):
really there's no alternatives there. So at that point size
matters and you have to go public once you're looking
for Well, we just sort of take private for fifty
five billion, So maybe that IPO line is higher than
I imagine, maybe it's seventy five billion. Let's bring this
back to alternatives. What was it about the alternative investment
(09:10):
world that you found so compelling versus your early experience
with public stocks and bonds.
Speaker 5 (09:16):
Well, I think one of the fortunate things that I
had with that pivot into alternatives was it was the
intersection of not just alternatives, but alternatives and wealth management, right,
thinking about how we deliver alternative investments to our Goldman
Sacks wealth management clients, right, and you think about the industry,
it really started alternatives focused on big institutions, pension funds, endowments,
(09:38):
sovereign wealth funds. But actually at Goldman Sachs, we've been
investing in alternatives for our wealth clients for over thirty years.
So that intersection has been really interesting, and obviously, you know,
fast forward to today. You know, the intersection of wealth
and alts is a topic that you hear about pretty
much every day.
Speaker 3 (09:56):
Right.
Speaker 2 (09:56):
When I think about the original institutions, you think of
the Yale model and David Swinson and what was that
the early nineteen eighties something like that, So that's forty
something years ago. You guys have been doing this for
thirty years. Not only has that market change, but there's
been strategy and culture changes over the same period. Explain
(10:19):
what you've observed and how you've helped shape this.
Speaker 5 (10:23):
Yeah, So, look, I think the process of allocating to
alternatives for individual investors we've sort of honed and shaped
over the last you know, twenty five years. Part of
that starts with what do we advocate in terms of
how much our clients should have in alternatives. Right, So
go back to you know, when I started doing this
in two thousand and one, for a moderate risk client,
we already had at that point of twenty percent or
(10:44):
so allocation alternatives. Fast forward to today, we would tell
a moderate risk client they should have closer to twenty
seven percent of their.
Speaker 2 (10:51):
I've heard some people say sixty twenty twenty is the
new sixty forty. Is that just a cute line or
is there anything.
Speaker 3 (10:59):
To those No?
Speaker 5 (10:59):
No, I think we're heading in that direction, right. I
think for the clients that can withstand the liquidity, which
we should talk about and understand kind of the risk
return of alternatives, the idea of having a twenty percent
or so allocation to alternatives is something I think we're
going to talk about a lot more across all levels
of investors.
Speaker 2 (11:19):
And it sounds like given that even where current rates are,
it's still historically relatively low, which means we're not seeing
a lot of yield on the fixed income side of
the ledger. If we're talking sixty twenty twenty, it sounds
like all or most of the shift into alts are
coming from low yielding bonds.
Speaker 5 (11:40):
So look, I think the twenty percent is the part
that I think I'm convicted on in the Alts piece.
The question of where you fund it from, I think
there's debate around, right, You've heard people say fifty thirty,
twenty sixty, twenty twenty. I think that depends a little
bit on where where are you going within alternatives?
Speaker 4 (11:57):
Right?
Speaker 5 (11:57):
Are you leaning into private credit to your point and
looking for a high single digit yield in private credit?
Then yes, then maybe you're funding it out of the
fixed income bucket, or if you're leaning more into equity
related strategies right, than maybe the funding source comes a
little more of equities.
Speaker 4 (12:11):
Right. So I think the part that I'm focused on
is the.
Speaker 5 (12:13):
Idea that people should have that twenty percent in there, right,
And then I think it's a bespoke conversation about is
it fifty or sixty equities?
Speaker 4 (12:22):
You know, where's it fun from?
Speaker 2 (12:24):
And last question about your career, you describe yourself as
a Goldman lifer. What's kept you there for almost three decades?
Speaker 5 (12:33):
So the number one thing is definitely the people, right,
I mean going somewhere for twenty seven years, which I
never thought I would be doing. You know at the
same firm. It's all about the quality of the people
and the engagement. I think it's high quality people I
enjoy working with every day. I think the second part
is I think I got lucky falling into a really
interesting part of Goldman's Acts where I get to watch
(12:54):
the evolution of the alternative investment's asset class and the
growth of our wealth business. And I think that dynamism
of that has also kept me engaged for.
Speaker 2 (13:03):
That interesting super fast growing and constantly evolving. I would
imagine that no week is the same over the past
twenty three twenty four years running ALTS exactly.
Speaker 5 (13:14):
And I think the other interesting part about it is
when you have a dislocation in the markets in the world,
alternatives is actually a part of the portfolio where you
usually go to capitalize on that, Right.
Speaker 4 (13:25):
So I think that's also really interesting. Right.
Speaker 5 (13:27):
So you have a dislocation, well, let's look at special
situations or distress managers, right, or Wow, you have incredible
innovation happening in technology, You're going to do private growth
equity investing, right, And so I think that that's the
dynamism I'm talking about in terms of tapping into dislocations,
tapping into innovation.
Speaker 4 (13:44):
A lot of that happens in the private market.
Speaker 2 (13:46):
Really super interesting. Coming up, we continue our conversation with
Kristin Olsen, Goldman Sachs, Global head of Alternatives for Wealth
clients describing the Goldman Sachs alternative wealth experience.
Speaker 3 (13:59):
I'm very rich Helts.
Speaker 2 (14:00):
You're listening to Masters in Business on Bloomberg Radio.
Speaker 3 (14:24):
I'm Barry red Halts.
Speaker 2 (14:25):
You're listening to Masters in Business on Bloomberg Radio. My
extra special guest this week is Kristen Olsen. She is
Goldman's global head of Alternatives for Wealth. She's been with
the firm for twenty seven years, and she's been running
the old Capital Markets group for twenty four of those
twenty seven years. So we were talking earlier about sixty
(14:45):
twenty twenty or fifty thirty twenty. How do you think
about those allocation ranges? How do you determine what's the
best recommendation for an ultra high networth portfolio line portfolio
who maybe they're not all that familiar with alternatives, but
they want to diversify and have a little bit more
(15:08):
of non correlated returns.
Speaker 5 (15:11):
So I think we are blessed at Goldman Sachs to
have the benefit of our CIO and our investment strategy group.
So that's sort of where we start writing a conversation
with a client, which is how much of the portfolio
should we have in alternatives? And we need to look
a lot of factors in terms of risk tolerance, tolerance
for illiquidity, what are they looking to derive from that
portion of the portfolio. But sort of as a starting point,
(15:33):
we talked a little about this earlier. We would talk
to a client who has a moderate risk appetite about
having twenty seven percent alternatives, and so we'd have that
conversation around does that feel right? Is that the number
that we want to get to? And then once we're there,
then it becomes how do we get there? Because that's
actually the really hard part and alternatives.
Speaker 3 (15:50):
When you say how do we get there?
Speaker 2 (15:51):
How do we over time allocate from some other bucket
into the Olds buck exactly.
Speaker 5 (15:57):
And the complication is traditional private alternatives are capital commitments
that generally call down capital and make investments over five
to ten years, and so there's a lot of art
and science of how do you get to twenty seven percent?
In alt right, it's going to take you five, seven,
ten years to get to that target as you sort
(16:18):
of ladder into these different commitments that you make. So
we spend a lot of time with clients talking about
that process.
Speaker 2 (16:26):
So I'm very familiar with capital calls, typically from venture
capital funds, occasionally for some oversubscribe funds, that you do
all the docks and then you wait for a window
to open up where they'll take your money. I don't
usually think of private equity of private credit in those terms,
but you have a whole lot more experience in this
(16:48):
space than I do. Is that what typically takes place
Someone says, hey, I want to commit up to ten
million dollars to this fund.
Speaker 3 (16:56):
How long does it take for those capital calls to
come in?
Speaker 2 (16:59):
How long is the client waiting? And then what are
they sitting in while they're waiting? Are they just sitting
in treasuries?
Speaker 5 (17:05):
And this is where alternatives are complicated, right? So if
you thought we'll talk a little bit about where alternatives
are going, right and when we talk about evergreens and
open ended which kind of get rid of that capital
called dynamic, But if you thought about ultrahigh network clients
who historically and continue to really invest in traditional closed
down alternatives. You need to be very close to that
(17:26):
client and how you build that portfolio year and year
out making commitments they are going to call capital in
private equity, in private traditional private credit funds, in real
asset funds. General is a ten year fund and they're
making investments over the first five years and trying to
harvest those over the second five years. And so our
job as advisors to our clients is how do we
build that laddered portfolio. How do we commit every single
(17:48):
year so that when we get to five to six
years in you hopefully have a self funding portfolio and
hopefully you have money you're invested. Capital is getting you
to that twenty seven percent of your portfolio in the ground,
but it's hard to get there, and so we spend
a lot of time advising clients on how to how
to build those portfolio.
Speaker 2 (18:06):
So typically, all right, I have fifty million dollars, I'm
going to put ten million. I'm going to commit ten
to this. How long will it take before about five
years before that's fully general? And then what are am
I sitting in treasuries or money markets?
Speaker 3 (18:20):
What am I doing in the meeting?
Speaker 4 (18:21):
Then you're diluting your return right. And so this is
the other part.
Speaker 5 (18:24):
You need to be really fully invested other than what
you think the short term capital call needs are. So again,
this is where the complexity comes in, which is how
do I not have drag and make sure I'm fully
invested right, but still have liquidity to fund a capital
that might come up the next month. And so that's
where our advisors spend a lot of time with clients
on making sure that we're not sitting in cash while
(18:44):
we're waiting for capital calls.
Speaker 2 (18:45):
So ten million over five years sounds like two per year.
So in other words, it's not like I'm going to
allocate that money to this, correct I just am anticipating
a call for each of the next five years for
about two million, and the money is already invested rather
than sitting around waiting for this exactly.
Speaker 3 (19:04):
It's a lot of moving parts.
Speaker 4 (19:05):
It's a lot of moving parts.
Speaker 5 (19:06):
But by the way, but that's what leads to when
you think about opening up the aperture and trying to
make alternatives more accessible. What you've seen over the last
few years is this incredible innovation around different structures that
are catering to individual investors. So if you think about
evergreen and open ended alternatives, you take away the complexity
(19:27):
of capital calls and distributions and managing liquidity because that
all gets done then within the vehicle, and there's trade
offs to that. But that's where you're seeing over the
last five years a tremendous amount of growth in alternatives
targeted at individual investments.
Speaker 2 (19:42):
So you might be giving up some performance in exchange
for a whole lot more simplicity exactly. So let's shift
from the process of allocating and getting calls to the
actual ALT managers. I'm assuming you have dozens and dozens
of not hundreds on your platform, some in house, some
outside of the firm. How do you start the process
(20:04):
of figuring out what do we want this spread of
managers to look like?
Speaker 5 (20:08):
Yeah, so that's what I think we spend a lot
of time focused on. I think our north star is
how do we have the best platform of opportunities for
our clients, and so one I think that starts with
diversification right across a number of different vectors. So one
is we talked about the different strategies under the ALT banner.
We need to have different opportunities in each of those
(20:30):
lanes buy out, growth, venture, private credit, real assets, right.
And then we want to be open architecture for our clients, right,
so meaning.
Speaker 3 (20:40):
Not just gold Man, not just gold Man.
Speaker 5 (20:41):
So product we have, as we talked about, a phenomenal
alternative capability over five hundred million dollars in assets under management.
We have a thirty plus year track record, and we
have strategies that span all those various alternabasset classes. So
that's one way we implement for clients. The other is
open architecture. So we have vehicles where clients can invest
(21:03):
in different fund of funds, different strategies like our Secondari's funds,
our co investment vehicles, and then lastly curating direct access
to some of the best alts managers out there on
a single name basis. And so there's different ways that
clients can actually implement their portfolio right across those three
different implementation methods.
Speaker 2 (21:24):
So it's interesting we're talking about diversification and lack of correlation,
and I'm really hearing two distinct types of diversification. One is, hey,
these aren't public stocks, they don't follow that cycle, so
you should get some sort of non correlated returns. But
within each of the major subgroups of alternatives, and then
(21:48):
across those groups, this should be somewhat non correlated. Is
that is that affair of someone uncorrelated?
Speaker 3 (21:54):
Yeah?
Speaker 5 (21:54):
Look, I think what clients are looking for in alternatives
is diversification, so different return drivers than what they're getting
from public markets, hopefully, a lack of correlation to those markets,
and alpha to those markets, meaning outperformance relative to what
they otherwise would have gotten had they gone in the
public markets.
Speaker 4 (22:15):
Right.
Speaker 5 (22:15):
So, when we think about returns and alternatives, some of
it is absolute, right, so what type of returns are
those managers underwriting to in the portfolio? And that's an
absolute target, But then there's also a relative target, which
is how do we think about the premium you're getting
for that illiquidity? Right, So, if I'm going to tie
my money up for in a ten year private equity fund,
(22:36):
I want to be paid for that illiquidity. And so
then we think about am I getting several hundred basis
points a year better return then had I put that
money in at the same time and we're taking the
money out at the same time from the relevant public
market benchmark, Right, then I think I've been rewarded if
I've gotten three hundred basis points a year or something
(22:56):
in that ballpark better than the public alternative, and then
maybe you would say it was worth it for that.
Speaker 4 (23:01):
Inliquidity, well, that's the.
Speaker 2 (23:02):
Whole idea of the liquidity premium, right that not only
are you getting paid for illiquidity, but it becomes a
somewhat less efficient market, which means there's greater opportunity for
upside exactly.
Speaker 5 (23:15):
I mean, look, the private markets, they have a lot
more information than the public markets. Many strategies they have control, right,
so they can actually change the outcome at their portfolio companies.
They can change management, they can change strategy, a lot
of different ways to drive return that are not available
in the public markets.
Speaker 4 (23:33):
Right.
Speaker 2 (23:34):
So, given the fact that information is so important and
so different than publicly traded stocks and or bonds, how
do you start out doing the due diligence that has
to be like a giant lift, especially if you have
a few hundred managers on the platform.
Speaker 4 (23:51):
Yeah.
Speaker 5 (23:51):
Look, I think most investors need to seek the help
of a professional organization that can help them do that diligence.
So I think for us we have a group called
our External Investing Group it's over four hundred people globally,
it's two hundred and fifty people doing manager selection and diligence.
And so we like to deploy that team to do
(24:12):
the fiduciary diligence and all the outside managers that we're
partnered with, and that's a pretty intense process, right, Each
manager is going to take a couple months to do
the diligence. It's going to go through an investment committee process.
And as you know, like you look at a track
record from a manager, you really need to dig in
and understand kind of what's behind that track record, right,
lots of caveats sometimes, and so that's the work that
(24:35):
they're doing and going to their investment committees and getting approval.
So we work with that team to diligence the managers
that we think makes sense for our clients.
Speaker 2 (24:42):
So I'm going to guess there's some analysts, some lawyers,
some compliance people, some regulatory specialists. Like this isn't the
sort of thing that the average investor.
Speaker 3 (24:51):
Can undertake on their own.
Speaker 2 (24:52):
You really need a team of professionals to dive in.
Speaker 5 (24:55):
I think you want to have the advice of professionals.
The other part that we've found as we talk about
diversification being so important. So when we think about an
individual investor, I always think there's a couple of vectors
of diversification for them. One is diversification of strategy, which
you talked about under the al umbrella number two, diversification
by manager, right you want to work with different managers,
and then diversification by vintage year. So we think it's
(25:18):
very important for clients to be pretty programmatic about making
allocations every single year, because again, you don't want to
market time. You don't know when the best opportunities are
going to be, and actually it's usually when times feel
the worst is probably the best time to be allocating, right,
And so you know, and then when you dial that back,
you might be needing to make ten commitments a year,
(25:39):
fifteen commitments a year. How can you diligence enough managers
to decide that you've picked us the best one, right,
And so it gets very challenging and very complicated, and
that's why you see a lot of individual investors partnering
with an advisor or an advisor that has diligence capabilities
to help navigate them through who are the best managers
in each of their each of those lanes.
Speaker 2 (25:57):
So diligence is the first step, and that is all
the legal and the paperwork that has to be done.
Let's talk about risk assessment. How do you figure out
when you're looking at a variety of different investment strategies
and managers, Hey, how much bang am I getting relative
to the risk the client is assuming in this investment?
(26:19):
It would it would seem that's really challenging.
Speaker 4 (26:22):
Also, yeah, look, I mean there's things that you need
to look at.
Speaker 5 (26:25):
Obviously, you're going to look at the track record over time,
and you're going to look at the stability of the
team and do they have all the fundamental things that
lead to a repeatable investment process, right, which should argue
that you can rely on that track card as being
hopefully something that you could look at that could be
repeatable in the future.
Speaker 4 (26:41):
Right.
Speaker 5 (26:43):
I think the other important part is what's the concentration
of that strategy?
Speaker 1 (26:46):
Right?
Speaker 5 (26:46):
How many investments are they making? Is it highly concentrated,
is it more diversified. So, for example, one thing that
our clients have been long time investors in is secondary
private equity. And one of the interesting things about sexonies
is underneath one single fund, you may have thousands of companies,
so you have a tremendous amount of diversification. And because secondaries,
(27:09):
if you thought it secondary private equity, it's already partially invested.
So most traditional private equity funds it's a blind pool. Right,
you're committing capital that's going to investor in the next
five years. Secondaries allows you to take a look at
some of the money that's already in the ground and
actually buy that theoretically at a discount to it fair values.
Speaker 4 (27:26):
Right.
Speaker 2 (27:26):
So there are two types of secondaries that I'm familiar with,
and I want you to comment on this. One of
them is, Hey, a co investor in a fund suddenly
has a change in their liquidity needs, and hey, we
will want to sell this for you know, fifteen percent
discount from what the last closing date was, so you
get to buy in an earlier vantage at a discount.
(27:49):
That's one secondary you Is that something you were talking about.
Speaker 4 (27:53):
Yes, So that's an LP secondary.
Speaker 3 (27:55):
Right.
Speaker 5 (27:55):
Could be a big institution that for whatever reason wants
to do so that earlier this year he bounce their portfolio,
big university that as liquidity needs, right, we'll look to
go and get liquitting in the secondary market be individuals,
So that's sort of a traditional LP secondary.
Speaker 2 (28:09):
So the other thing I occasionally see is, hey, one
of our portfolio companies suddenly is adding this or pivoting
in this direction, and we're comfortable with how much US
as a fund they're putting into this company, and we're
going to continue maintaining this investment, but they need additional capital.
Speaker 3 (28:27):
Do you want to do well one off.
Speaker 2 (28:29):
Side pocket or people call it all sorts of different things.
How often you see that sort of thing coming?
Speaker 5 (28:34):
Yeah, So the other so when you look at the
secondary market, you have the LP secondaries, which you just
talked about. The other would be GP led secondaries. So
that's not initiated by the LP of the fund. It's
actually the manager of the fund to your point, saying, hey,
we have a company that we don't want to sell
right now. We want to continue to own, but we
need to find new capital to fund it. Right So
you might want to take out some of the old investors,
the GP might want to roll their capital, roll their
(28:56):
incentive fee. So that's the GP LED secondary also to
continuation vehicle. Many times you're hearing a lot about this
and so that's another part of what we do within
our secondary franchise that our clients have exposure.
Speaker 3 (29:08):
To really really interesting.
Speaker 2 (29:10):
Coming up, we continue our conversation with Kristin Olsen, Goldman's
global head of Alternatives for wealth, discussing the state of
alternative investing today.
Speaker 3 (29:20):
I'm Bury Results.
Speaker 2 (29:21):
You're listening to Masters in Business on Bloomberg Radio. I'm
Bury Results. You're listening to Masters in Business on Bloomberg Radio.
(29:42):
My extra special guest is Kristin Olsen. Kristen is the
global head of Alternatives for wealth management clients at Goldman Sachs,
a position she's held for twenty four of her twenty
seven years at Goldman. So before we get into the
state of altern of investing today, I'm fascinated by this
(30:03):
big survey you guys do each year. Over a thousand
clients and other people participat in it, and some of
the answers that come along are kind of expected, some
are really kind of surprising. Let's go over a few
of these because they're really fascinating. So, first, your survey
reveals wealthy individuals adopt alternative investments as their net worth grows.
(30:28):
That wasn't a surprise surprising but some of the specifics,
some of the percentages were really really like wow, look
at that. Tell us a little bit about the response
you get to that survey question.
Speaker 5 (30:40):
Yeah, so well, first I would say, this is our
inaugural survey, So this is the first time that we're
actually surveying a broad universe.
Speaker 3 (30:47):
Put me on that list.
Speaker 2 (30:48):
I want to see that data every year. I'm a
junkie for that sort of stuff, and I think.
Speaker 5 (30:52):
Part of the impetus for that too is just what
we've talked about, sort of the incredible interest by individual
investors and figuring out should they invest in alternative how
do they invest in alternatives? And so that was sort
of the impetus to this, you know, opening the door
to alternatives survey that we just did. I think the
data that you mentioned is not surprising, obviously from my seat,
starting with ultra high net worth clients.
Speaker 4 (31:13):
Sure, it's been.
Speaker 5 (31:14):
Investing alternatives for you know, twenty five plus years. I
was surprised by down the well spectrum, the fact that
there's a fair amount of participation all the way down
to the you know, one to five million dollar clients, right,
And I think as it becomes easier for these individuals
to invest in alternatives, and as there's more education around it,
(31:34):
those numbers are going to continue to go up.
Speaker 2 (31:36):
So I'll tell you what surprised me at first, blush,
and then as I thought about it, made a lot
of sense. Millennials are at the forefront of a significant
shift in investment behavior towards ALTZ. And as I began
to think about it, hey, these are the kids who
more or less came of age right into the Great
Financial Crisis. They're like, wait, stocks can go down also,
(32:00):
So I'm not terribly surprised by that once I thought
about it. But still, how significant of a shift is this?
Speaker 5 (32:07):
Look, I think we're it's fun to watch. Obviously we're
just starting to see it and you know, digesting the
survey results. But you know what I one part I
think about as millennials is their interest in accessing innovation, right,
Like this is a digital first generation, no doubt. And
so when you think again to our earlier comments, how
do you access innovation in healthcare in tech? A lot
(32:28):
of that is in the private markets, right, And so
I think part of that also might be the reason
why you see millennials, you know, being more inclined to
alternatives and being sort of kind of this shift in behavior.
Speaker 2 (32:41):
So let's talk about the percentage of people whose wealth
is professionally managed. And obviously the data set that this
question goes to is pretty significant. But fifty nine percent
of wealth amongst a thousand individual surveyed were professionally managed.
And I kind of scratched my head that because my
(33:01):
assumption has been amongst the ultra wealthy, it's even higher
just as a matter of a and I have time
or interest in this. Amongst most people, they're running their business,
they're continuing to accumulate more wealth. But I'm curious about
who was the data set this one went to, and
what do you think of that fifty nine percent number?
Speaker 3 (33:21):
High, low, somewhere in between.
Speaker 5 (33:22):
Well, so it went to one thousand investors million dollars
of investable assets plus and twenty five years old or older.
Speaker 3 (33:31):
So not necessarily Goldman Sachs call.
Speaker 4 (33:33):
Not necessarily the ultra high networth.
Speaker 5 (33:34):
And frankly, part of the intention was to try to
get a better sense for the broader individual market, not
just the ultra high networth market. I think, you know,
we have a long history in our wealth business. We
know the ultra high network space very very well. And
I think in that space, if we were to run
the survey, I mean very high percent ninety exactly right.
So my guess is that not professionally managed peace are
(33:56):
more self directed at the lower end of the well
spectrum would be my gaes and maybe younger.
Speaker 2 (34:01):
Right when you see black Rocket twelve trillion and Vanguard
at eleven trillion, Hey, someone's running their own portfolio. So
what would make sense forty one percent or so of people,
if not more doing it. It's really interesting to think
about what is the mass affluent doing, what is the
high net worth doing, what is the ultra high net
worth and multi family office doing. I think as you
(34:23):
go up that scale, is it's safe to say most
of them are working with professional advisors? Is that that
would be?
Speaker 5 (34:29):
That would be my guess for sure. The other part
is if they're self directed. And there's some of the
other survey data that also shows that, I think something
less than fifty percent of advisors have even brought up
alternatives with some of that's really interesting, right, And so
you have the self directed that probably are not accessing alternatives,
could very hard to do that without an advisor. And
then you only have something less than fifty percent of
(34:51):
advisors bring up alternatives like this is where the opportunity
is right on educating the advisors to feel more comfortable
talking to investors about altern internatives, and obviously the educating
the investor and investors.
Speaker 2 (35:03):
So one of the questions you ask led to an
answer that I adore because I'm constantly saying to not
only the.
Speaker 3 (35:12):
People I work with, other people.
Speaker 2 (35:15):
Your clients aren't telling you the truth. They have money
away from you. Your wild share is much lower than
you realize until you're with the same advisor for five
or ten years and the client is comfortable in shares.
But I love this data point. Households with ten million
dollars and up in investable assets typically engage two different
(35:36):
advisors compared with one advisor at the mass affluent and
high net worth groups. Tell us a little bit about
that dual advisor approach. These are We're not saying two
people at the same firm. These could be two completely
different firms.
Speaker 5 (35:51):
You know, I think as people go up the well spectrum,
they want to have different options, different viewpoints. You know,
have some capital at different organized, different.
Speaker 2 (35:58):
Firms, a little diverse internally exactly.
Speaker 5 (36:02):
I do think though from my experience on the well
side Altra Hinder recite at Goldman, it does tend to
be that over time though, there is a lead relationship, right,
And I think as you get higher up the well
spectrum and you have more complexity in your portfolio, a
lot of that, namely coming from alternatives, it becomes more
and more imperative to have somebody that's the quarterback or
(36:24):
the driver, you know, in the pole position, as opposed to,
you know, as opposed to two people both managing parts
of the portfolio.
Speaker 3 (36:32):
No one overlap.
Speaker 2 (36:33):
You don't want, you know, one overlap.
Speaker 5 (36:35):
And you also want you know, we talked about how
hard it is to build these alternative portfolios, you know,
doing that in two places, and how are you managing
the liquidity and how are you knowing how you're actually allocated? Overall,
I think you start to see this shift to one
advisor really being the lead advisor and the other advisor
maybe being a secondary advisor.
Speaker 2 (36:53):
So as much as I thought that was a fascinating
data point, this one kind of terrifies me. Millennials site
social media more often, while boomers rely on traditional media
outlets for their investing and financial planning information. Social media
really well.
Speaker 5 (37:13):
You know one of the things that I say, and
I'm not definitely not a millennial, but you know, if
you going on your LinkedIn feed, you see videos or
you know, on Instagram from major alternativesting firms, right, and
so you can see why. I don't know what percent
of their time they're spending on social media, but naturally
these ads and these videos are getting served up to
them there, so it seems logical to me then that
(37:36):
that's where they're going to.
Speaker 2 (37:37):
Well. LinkedIn is probably the most credible of all the
social media outlets, but I think of TikTok and Instagram
and Twitter. A couple of years ago, the IRS put
out a list of forty tax statements that they had
culled from various social media that were wrong, some of
(37:58):
which would lead to penalties, interest or jail time if
you followed them. And they literally forty here are forty
one things that we got from social media. Do not
do any of these things. So that's why I say,
I get a little nervous when I see millennials with
citing social media. LinkedIn, of all the places, seem to
be the most credible because it's business oriented, not some
(38:21):
wacky guy telling you that if you're on a boat
offshore on April fifteenth, you don't know any taxes. That
was the one that really stayed out with me, right,
all right, So that's all I have to do is
just be out on the water at fifteenth could save
myself a lot of money.
Speaker 5 (38:35):
I mean, look, I think it all goes back to
the number one thing that I think we're focused on
with respect alternatives and individual investors, which is education, right absolutely,
and so you know, hopefully they're not getting their education
off of TikTok, but you know, all of all of
us need to think about how do we better educate
around the role of alternatives, the risk of alternatives, how
(38:58):
you invest in alternatives. And so I think we're spending
a lot of time thinking about advisor education and client
education and by the way, education that we roll out
on social media, right because if that's where they are.
Speaker 3 (39:08):
Right, you got to meet them where they are.
Speaker 4 (39:10):
That's where we're going to have to put the education.
Speaker 2 (39:12):
So let's bring this back around to alts today. Let's
talk about themes. What are you most excited about in
private markets? What's new? Interesting and you know thrilling. Can
I use the word thrilling about alts?
Speaker 5 (39:24):
Well, look, I think when you say thrilling, I think
about all what are you enthusiasts innovation that's happening right
now in technology? Obviously, how can we have a podcast
and not mention AI on any topic.
Speaker 3 (39:37):
I'm not familiar with it. Tell me a little bit.
I haven't heard enough about that.
Speaker 5 (39:40):
But look, I think that what we're seeing in terms
of the incredible advances in AI is bringing back a
lot of risk appetite to invest in venture and in
growth and to participate in what they think is going
to be you know, transformational technology advancements you know around AI,
and that permeates not just the venture tech and growth space,
but how AI is going to transform additional businesses. Right,
(40:03):
So I think that segment is quite interesting. And then
a lot of the other things that we think are
interesting are a little more not thrilling, which was the
word you use.
Speaker 2 (40:13):
Maybe that's the wrong word, but what's really interesting with
great growth potential? Well, look that's thrilling too.
Speaker 5 (40:19):
So look, I would say we talked a little about secondaries.
We really like secondaries because again, if you think about
the primary alter markets growing right, more money is going
to alternatives. That naturally means the secondary market's going to
grow right to spill over. It's correlated to the growth
of the primary markets and alternatives. So there's me more
opportunity there, and we really like the risk return for
(40:40):
clients there in that segment. So I think that's one
space that we very much like. What else would I say?
Speaker 2 (40:48):
You mentioned real assets, and very often when you talk
about real assets I think that has morphed over the
past decade and evolved. I used to think of real
ass that says timber or coal or whatever, but now
it's things like infrastructure and data centers, laboratories and healthcare.
(41:10):
Tell us a little bit about what the real assets loft.
Speaker 4 (41:13):
Yeah, that's where I was going to go.
Speaker 5 (41:13):
I would say for our clients, I think for a
long time, real assets was real estate, right. I think today,
if you wanted to talk about some of the more
interesting parts, it's the things you alluded to, which is
what's happening in infrastructure. Infrastructure is one we're spending a
lot of time with our clients on. Because institutions have
invested for a long time in infrastructure assets. Individuals less
so and so trying to understand the rule of infrastructure
(41:35):
and a portfolio which has a lot of unique benefits.
Speaker 4 (41:37):
Right.
Speaker 5 (41:37):
A lot of times it's not correlated to GDP growth. Right,
This is a lot of times critical infrastructure things that
we need to do. It has inflation protection benefits, right,
something we didn't need to talk about inflation ten years ago,
but now, you know, how do we think about things
that are inflation protected with long term contracts with built
in escalators. And then the other part is educating around
It's not your grandfather's infrastruct sure, right, people tend to
(42:01):
think right about bridges and toll roads, right, exactly Today
it's the things you talked about. It's digital infrastructure, it's
data centers to support AI, you know, right, it's energy transition, right,
It's a lot of the very I guess maybe the
more thrilling parts of investing are actually in the infrastructure
asset class, and so that is part of the real
assets that's grown a lot and where there's a lot
(42:22):
of interest.
Speaker 2 (42:23):
I wish I can remember where I read this somewhat
technical piece because we always talk about AI, but you
alluded to AI plus another sector of all the different
parts of the economy that AI is going to have
a big impact. This author had made the claim. I
read it like two weeks ago. So it's gone that
(42:44):
AI and genomics, oncology and healthcare are going to be
amazing because what you can do with AI in terms
of testing new molecules and new treatment regimes is just
a whole other less Are you looking at AI plus
another sector or is it just all AI all the time?
Speaker 5 (43:06):
No? Definitely plus other sectors. And you're completely on point
that life sciences hows that can be impacted by AI
healthcare right and by the way, every sector in the
economy is likely going to be impacted. So you know,
how do when you look at this best your diligence question,
you look at private equity firms that you're diligencing today,
how what kind of value creation playbook do they have
(43:27):
for their portfolio companies and how are they thinking about
the AI opportunity or threat for their portfolio companies?
Speaker 4 (43:34):
Right?
Speaker 5 (43:34):
So it's going to infuse really all the different sectors
of investing within alternatives.
Speaker 2 (43:40):
So what other alternative strategies are you seeing the most
demand for clients? Like I'm enthusiastic about AI and life sciences.
Are people asking for real assets or for infrastructure or
for sec Like, what are you hearing from the bottom up?
Speaker 4 (43:56):
Well, that would be private credit.
Speaker 2 (43:58):
Really yeah, response to a relatively low rate and correct.
Speaker 5 (44:02):
What I would say, what we're hearing from clients for
the last few years has been a search for yield.
It desire for yield, and that's led to a lot
of interest from the bottom up in private credit. Right
a place where you can be top of the capital structure,
so a lot of protection below you and get yields
that are high single digits with quarterly cash flow. That's
(44:23):
been an area of pretty broad interest across the well
spectrum in alternatives.
Speaker 3 (44:29):
Huh really really interesting.
Speaker 2 (44:30):
So last question before I get to my favorite questions
that I ask all my guests when it comes to alternatives.
What are investors not talking about or thinking about, but
perhaps should be. What sort of it could be asset
data point policy, what's important that they might be overlooking?
Speaker 5 (44:51):
I guess the thing that comes to mind for me
right now and we think about the advent of all
these evergreen, open ended perpetual perpetual f funds, and there's
been a lot of enthusiasm a lot of growth in
some of the sectors. Our investors spending a lot enough
time thinking about how big some of these vehicles are getting,
and then what does that actually mean in terms of
(45:12):
how much origination that they need to have to be
able to deploy the capital? Right, because in these evergreens,
if you don't actually have if you have more capital
coming in then you can actually invest, You're going to
start diluting your returns, right, You're going to have cash drag.
And so you know, our investors spending time and thinking
about who they're investing with and do they have enough
origination capabilities to be fully invested in high quality investments.
(45:35):
So I think that'd be one thing that I would
think about. The other thing that I'm interested to see
how it evolves is, you know, we're new in this
perpetual evergreen alt space, you know, last five years. You know,
how do we start to see performance divergence over the
next five years?
Speaker 1 (45:50):
Right?
Speaker 5 (45:51):
I don't think we've seen a lot yet because we're
still in the early innings, and so I'll be curious
to see how investors react to performance divers or negative
performance on some of these and what happens do we
see redemptions or are investors long term minded? And do
they stay the course?
Speaker 3 (46:08):
Huh? Really really interesting.
Speaker 2 (46:10):
Let me jump to my favorite questions that I ask
all of my guests, starting with something that you hinted
at but didn't expand on. Tell us about your mentors
who helped shape your career.
Speaker 5 (46:23):
So I have to mention Eric Lane. So he was
the one who won me in the Analyst draft and
I then worked with him for decades and I owe,
you know a lot of my success to Eric, and
part of it is we sat in like a trading
desk type of format when I started, and the benefit
(46:45):
of that was just getting to hear him on the
phone every day with clients and see how he managed
difficult situations, how he explained things. You know, there's an
ability to sort of really apprenticeship right next to him.
And the other thing that I just really loved about
working with Aaron, and maybe maybe I hate it at
the time, was he would throw you into situations that
you felt ill prepared for, but he knew you could.
Speaker 4 (47:07):
Handle deep into the pool exactly.
Speaker 5 (47:10):
And sort of just forced you to go into the
situations that you may have not thought you're ready for.
And that really allowed you to sort of step function
I think, improve in your job and really learn, and
then he was always there to support you if it
didn't go as well.
Speaker 3 (47:23):
As you really really super interesting. Let's talk about books.
What are some of your favorites? What are you reading
right now?
Speaker 5 (47:29):
So I've really been enjoying the Walter Isaacson biographies, and
we talked a little about life sciences.
Speaker 3 (47:35):
And one that I I was going to say, which
one of you?
Speaker 2 (47:38):
So I have Leonardo sitting on a night table out
east waiting for me to have gotten to that one.
Speaker 3 (47:47):
What it's like, it's a giant.
Speaker 4 (47:48):
Yeah. So I actually just finished the one on Elon Musk.
Speaker 3 (47:51):
Huh.
Speaker 5 (47:52):
But the one that I really liked was Codebreaker about
Jennifer DOWDNA discovered Crisper.
Speaker 2 (47:58):
All right, next question, what are you streaming these days?
Give us your favorite podcast? Netflix, Amazon Prime? What's keeping
you entertained?
Speaker 5 (48:07):
I just started watching an old series I'm only two
episodes in, which is Scandal. So that's what I'm watching
right now, Little Washington, d C Intrigue. In terms of podcasts,
of course, all the Bloomberg podcasts, and you don't have.
Speaker 2 (48:22):
You don't have to do that.
Speaker 5 (48:23):
That's if I were to say one that I listened
to from time to time just for some comedy, SmartLess.
Speaker 3 (48:30):
I love that.
Speaker 2 (48:30):
I'm a big fan of just Justin Batement, Jason Bateman,
you his sister Justine.
Speaker 4 (48:35):
It was a great guest and they're so funny.
Speaker 2 (48:37):
So I've interviewed Michael Lewis a million times, and after
his daughter was killed in a car accident, they had
him on and it was a few months later and
he describes the grief process. He's just such an extraordinary
human being. To listen to someone share that it was,
it was both amazing and terrible the same time. But
(49:01):
they're always fun and they all seem to torment each other.
They're very amusing. Final two questions, what sort of advice
would you give to a recent college grad interested in
a career in either alternatives or wealth management.
Speaker 5 (49:16):
Well, I think that the benefit that a recent college
grad has is there's so much information at their fingertips
to get smart and to get be interested, and to
learn about the industry before they come into it, and
to be really well educated. You know, it was a
lot harder twenty seven years ago. Right now, everything's at
their fingertips. So I think be prepared and then don't
be scared to network right, user relationships, meet people, reach out.
Speaker 4 (49:40):
I think that would be the best advice.
Speaker 3 (49:41):
Really really good.
Speaker 2 (49:43):
Final question, what do you know about the world of
alternative investing today would have been helpful back in two
thousand when you were moving into this space.
Speaker 5 (49:51):
Well, I think about it a little bit personally, which
is you know, we have evolved a lot in how
we advise clients to INVESTMENTULTI where we talked about the process,
how do you think about sizing and building it out
year and year out? And if I look back to
what I started, I definitely didn't have that rigor in
my own personal investing in alts and definitely undersized, was
not diversified enough. And so I think I wish all
of the rigor we've put into it I had known
(50:13):
back then in terms of how we were building portfolios
personally and for our clients.
Speaker 2 (50:18):
Really super interesting, Kristin, Thank you for being so generous
with your time. We have been speaking with Kristin Olsen.
She's Goldman Sachs's global head of Alternatives for Wealth. If
you enjoy this conversation, well, be sure to check out
any of the five hundred and sixty eight we've done
before over the past eleven years. You can find those
(50:40):
at Bloomberg iTunes, Spotify, or here on YouTube or wherever
you find your favorite podcasts. And be sure and check
out my new book How Not to Invest The Ideas, numbers,
and behaviors that destroy Wealth and how to avoid them
How Not to Invest at your favorite bookseller.
Speaker 3 (50:59):
I would be.
Speaker 2 (50:59):
Remember if I do not thank the Crack team that
helps with these conversations together each week. Alexis Noriega is
my video producer. Anna Luke is my audio producer. Sean
Russo is my head of research. Sage Bauman is the
head of podcasts here at Bloomberg.
Speaker 3 (51:16):
I'm Barry Ridholts.
Speaker 2 (51:18):
You've been listening to Masters in Business on Bloomberg Radio.
Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
Business with Barry Ritholts on Bloomberg Radio.
Speaker 2 (00:16):
This week on the podcast, I have an extra special guest.
Kristin Olsen is Goldman Sachs's global head of Alternatives for Wealth.
She's a self described Goldman Sachs lifer. She went to
the firm straight out of Georgetown twenty seven years ago.
Speaker 3 (00:33):
She's been running the Alts.
Speaker 2 (00:35):
Group for the past twenty four years. There aren't many
people in the world of either wealth management or alternatives
that are as knowledgeable and experienced as Kristin is. I
thought this conversation about everything from private equity to private
credit to real assets including real estate and infrastructure investing
(00:57):
was absolutely fascinating, and I think you will also with
no further ado my conversation with Kristin Olsen. Kristin Olsen,
Welcome to Bloomberg.
Speaker 4 (01:07):
Thanks for having me, Barry.
Speaker 2 (01:08):
Well, I've been looking forward to having this conversation. Alts
are obviously a super hot topic these days, but before
we get into that, let's talk a little bit about
your background. You arrived at Goldman Sachs directly from undergraduated Georgetown.
What led you to finance and what led you to Goldman.
Speaker 5 (01:28):
So I would say, you know, corraduating from Georgetown, I
actually wasn't sure what I want to do. I was
interested in corporate finance, but I was particularly drawn to
the idea of joining a big analyst class with great
training at one of the big investment banks. And then
I'd say I was fortunate enough through the in unity
process to land at Goldman Sacks and that turned out
(01:48):
to be a fantastic place to start my career in
investment banking in the Financial Institutions group.
Speaker 2 (01:55):
And you started as an analyst in investment banking, did
you go the whole CFA route one, two, and three.
Speaker 4 (02:02):
Nope, just two years.
Speaker 5 (02:03):
I got my CFA as an analyst at Goldman Sachs.
That was my that was my training, two years in FIG.
Speaker 2 (02:09):
And then how did you end up pivoting to ALTS?
It seems so different to go from transactional banking, especially
when you started heading right into two thousand.
Speaker 3 (02:20):
What was the appeal of ALT?
Speaker 5 (02:22):
Well, it's funny I didn't go directly into ALTS. It
took a little segue. So in two thousand, as a
third year analyst, I wanted to do something different. It's
hard to think. Way back then, that was the dawn
of the Internet, and you know, everyone was going to
work on different dot coms, different startups, and I took
a little bit of a safer route and decided to
work on the Goldman dot Com.
Speaker 2 (02:43):
Project, which is what which was really their own build
out of their own website exactly.
Speaker 5 (02:48):
That's how long ago it was, if you think about it,
we didn't have an online ability for our clients to
access their accounts, to trade stocks, to access information as.
Speaker 2 (02:58):
Late as two thousand, Hey maybe we should get a website.
Speaker 4 (03:01):
That was the start of it.
Speaker 5 (03:02):
And also thinking about what kind of business we could
evolve around self directed investors going to Goldman dot com
versus at that time, E Trades, schwab right, all the
online access that was happening, and so I decided to
spend my third year focused on that business endeavor, and
then that led right to the DOCM bubble bursting, which was,
(03:27):
you know, pretty much I was pretty much done with
my third year analyst program.
Speaker 4 (03:30):
I had a few more months.
Speaker 5 (03:31):
That was kind of February March of one, and so
when that happened, they went to the you know, US
poor third year analysts and said, you've got a few
more months on your program, why don't you move into
this investment management division at Goldman Sachs, which I knew
nothing about at the time. And you're going to interview
with a bunch of people. And it was sort of
a group interview. And this is funny, but.
Speaker 2 (03:53):
Meaning you with a bunch of people or what person
with a bunch of people.
Speaker 5 (03:57):
At a bunch of analysts? Wow, and funny story. My
mentor and longtime boss. I heard this after the fact.
We'll say I won Kristen and the analyst lottery or
the analyst draft. He drafted me. And I didn't know
anything about alternatives. I didn't know anything about investment management.
I didn't know anything about wealth management. And the seat
(04:17):
I got put into at the time was called our
Special Investments group. So that's what we called alternatives back then.
Special investment.
Speaker 3 (04:23):
Huh.
Speaker 2 (04:23):
Really interesting? And to be clear, Goldman has long had
a reputation as very savvy traders and very savvy participants
in public markets, and very very savvy in terms of seating. Hey,
we have this great trader, but he wants to leave
(04:43):
and start his own hedge fund. Let's be his prime
broker and let's see them and participate in the upside.
So I typically think of Goldman as a big public player.
This has been developing for you know, longer than you've
been there. What's the total assets that Goldman runs in
(05:04):
terms of privates.
Speaker 4 (05:06):
Over five hundred million dollars.
Speaker 3 (05:07):
That's real money.
Speaker 5 (05:08):
Yeah, I mean, I think it's one of the things
that people don't realize, which is you talk about going
back twenty seven years ago. We've had a private investing
business going back well over three decades wow, and over
five hundred million assets today. We are one of the
largest managers of alternative assets.
Speaker 4 (05:24):
So people don't know.
Speaker 2 (05:25):
So how has this space changed over the twenty three
twenty four years you've been working in.
Speaker 4 (05:33):
Alts incredibly, right?
Speaker 5 (05:35):
I mean I think if you thought about the expansion
of the different asset classes that sit under alternatives, right,
So that's a broad word that describes lots of different
types of strategies.
Speaker 2 (05:45):
Break it down for us, what are the key.
Speaker 5 (05:47):
You were starting with hedge funds, So that's one sector.
But if you actually think about where we focus more,
it's much more on the private side than the public alls.
So if you think about under that umbrella, it's private equity.
But again, under private equity, let's think about the different
strategies there, everything from buy out through growth equity, through
venture capital, then the advent up a big private credit
(06:09):
asset class with an alternatives right, and even within that
everything from direct lending to hybrid capital solutions to distress right,
all of that falls under this private credit bucket. And
then you have real assets, real estate, infrastructure, and so
the asset class has become much more mature and much broader.
And then obviously we've seen tremendous inflows over the last
(06:31):
two three decades, and it's.
Speaker 2 (06:33):
It's still a fraction of the size of the public market.
So I think that kind of gets lost in all
the enthusiasm. Well, it's relatively small compared to stocks, bonds,
or any other private.
Speaker 5 (06:46):
Exactly, Yet a lot of the economy is driven by
private companies, right, And so I think that's part of
the impetus right now as we see kind of the
aperture opening for alternatives to individual investors, right, is how
do you tap into other sources of growth in the
economy if you're only investing in public markets? Right? So
I think there's an imperative for a lot of investors
(07:06):
to learn more and start to invest in private markets.
Speaker 2 (07:10):
So some of the drivers of the growth in the
space are obviously privates are the majority of economic activity
in the country. At the same time, we've seen the
number of public companies shrinking between buybacks and mergers and
the limited number of IPOs, the total number of public
(07:31):
companies are becoming smaller as privates get bigger. I'm going
to ask you to speculate what might reverse that shrinkage
in the number of US public companies.
Speaker 5 (07:42):
Well, look, I think high quality, high growth companies are
many of them are still going to revert back to
the public markets, right, and hopefully we're starting to see
a pick up an IPO activity. I think you'll see
some of the marque growth companies, tech companies, AI companies
that need massive amounts of capital to fund themselves.
Speaker 3 (07:58):
There's no alternative to go back to.
Speaker 4 (07:59):
The IPO markets, right.
Speaker 5 (08:01):
But you've seen a lot of innovation in the private
markets to allow companies to say private for a lot longer, right,
And so I think average time to IPO now is
ten years. But what you're seeing the interim are secondary
funds doing things like continuation vehicles right to allow to
change the investor base but stay private for a.
Speaker 4 (08:20):
Longer period of time.
Speaker 5 (08:21):
There's just a lot more liquidity in private markets to
allow these companies to maybe not have to ever go
public if they don't want to.
Speaker 2 (08:28):
You know, it felt like in the nineties there was
this mad rush to go public, very often with flimsy
business models, clicks and eyeball stuff like that, And now
it seems like we've swung the pendulum completely in the
other direction, where there is no rush to go. But
at a certain point, some of these companies get so large,
(08:48):
really there's no alternatives there. So at that point size
matters and you have to go public once you're looking
for Well, we just sort of take private for fifty
five billion, So maybe that IPO line is higher than
I imagine, maybe it's seventy five billion. Let's bring this
back to alternatives. What was it about the alternative investment
(09:10):
world that you found so compelling versus your early experience
with public stocks and bonds.
Speaker 5 (09:16):
Well, I think one of the fortunate things that I
had with that pivot into alternatives was it was the
intersection of not just alternatives, but alternatives and wealth management, right,
thinking about how we deliver alternative investments to our Goldman
Sacks wealth management clients, right, and you think about the industry,
it really started alternatives focused on big institutions, pension funds, endowments,
(09:38):
sovereign wealth funds. But actually at Goldman Sachs, we've been
investing in alternatives for our wealth clients for over thirty years.
So that intersection has been really interesting, and obviously, you know,
fast forward to today. You know, the intersection of wealth
and alts is a topic that you hear about pretty
much every day.
Speaker 3 (09:56):
Right.
Speaker 2 (09:56):
When I think about the original institutions, you think of
the Yale model and David Swinson and what was that
the early nineteen eighties something like that, So that's forty
something years ago. You guys have been doing this for
thirty years. Not only has that market change, but there's
been strategy and culture changes over the same period. Explain
(10:19):
what you've observed and how you've helped shape this.
Speaker 5 (10:23):
Yeah, So, look, I think the process of allocating to
alternatives for individual investors we've sort of honed and shaped
over the last you know, twenty five years. Part of
that starts with what do we advocate in terms of
how much our clients should have in alternatives. Right, So
go back to you know, when I started doing this
in two thousand and one, for a moderate risk client,
we already had at that point of twenty percent or
(10:44):
so allocation alternatives. Fast forward to today, we would tell
a moderate risk client they should have closer to twenty
seven percent of their.
Speaker 2 (10:51):
I've heard some people say sixty twenty twenty is the
new sixty forty. Is that just a cute line or
is there anything.
Speaker 3 (10:59):
To those No?
Speaker 5 (10:59):
No, I think we're heading in that direction, right. I
think for the clients that can withstand the liquidity, which
we should talk about and understand kind of the risk
return of alternatives, the idea of having a twenty percent
or so allocation to alternatives is something I think we're
going to talk about a lot more across all levels
of investors.
Speaker 2 (11:19):
And it sounds like given that even where current rates are,
it's still historically relatively low, which means we're not seeing
a lot of yield on the fixed income side of
the ledger. If we're talking sixty twenty twenty, it sounds
like all or most of the shift into alts are
coming from low yielding bonds.
Speaker 5 (11:40):
So look, I think the twenty percent is the part
that I think I'm convicted on in the Alts piece.
The question of where you fund it from, I think
there's debate around, right, You've heard people say fifty thirty,
twenty sixty, twenty twenty. I think that depends a little
bit on where where are you going within alternatives?
Speaker 4 (11:57):
Right?
Speaker 5 (11:57):
Are you leaning into private credit to your point and
looking for a high single digit yield in private credit?
Then yes, then maybe you're funding it out of the
fixed income bucket, or if you're leaning more into equity
related strategies right, than maybe the funding source comes a
little more of equities.
Speaker 4 (12:11):
Right. So I think the part that I'm focused on
is the.
Speaker 5 (12:13):
Idea that people should have that twenty percent in there, right,
And then I think it's a bespoke conversation about is
it fifty or sixty equities?
Speaker 4 (12:22):
You know, where's it fun from?
Speaker 2 (12:24):
And last question about your career, you describe yourself as
a Goldman lifer. What's kept you there for almost three decades?
Speaker 5 (12:33):
So the number one thing is definitely the people, right,
I mean going somewhere for twenty seven years, which I
never thought I would be doing. You know at the
same firm. It's all about the quality of the people
and the engagement. I think it's high quality people I
enjoy working with every day. I think the second part
is I think I got lucky falling into a really
interesting part of Goldman's Acts where I get to watch
(12:54):
the evolution of the alternative investment's asset class and the
growth of our wealth business. And I think that dynamism
of that has also kept me engaged for.
Speaker 2 (13:03):
That interesting super fast growing and constantly evolving. I would
imagine that no week is the same over the past
twenty three twenty four years running ALTS exactly.
Speaker 5 (13:14):
And I think the other interesting part about it is
when you have a dislocation in the markets in the world,
alternatives is actually a part of the portfolio where you
usually go to capitalize on that, Right.
Speaker 4 (13:25):
So I think that's also really interesting. Right.
Speaker 5 (13:27):
So you have a dislocation, well, let's look at special
situations or distress managers, right, or Wow, you have incredible
innovation happening in technology, You're going to do private growth
equity investing, right, And so I think that that's the
dynamism I'm talking about in terms of tapping into dislocations,
tapping into innovation.
Speaker 4 (13:44):
A lot of that happens in the private market.
Speaker 2 (13:46):
Really super interesting. Coming up, we continue our conversation with
Kristin Olsen, Goldman Sachs, Global head of Alternatives for Wealth
clients describing the Goldman Sachs alternative wealth experience.
Speaker 3 (13:59):
I'm very rich Helts.
Speaker 2 (14:00):
You're listening to Masters in Business on Bloomberg Radio.
Speaker 3 (14:24):
I'm Barry red Halts.
Speaker 2 (14:25):
You're listening to Masters in Business on Bloomberg Radio. My
extra special guest this week is Kristen Olsen. She is
Goldman's global head of Alternatives for Wealth. She's been with
the firm for twenty seven years, and she's been running
the old Capital Markets group for twenty four of those
twenty seven years. So we were talking earlier about sixty
(14:45):
twenty twenty or fifty thirty twenty. How do you think
about those allocation ranges? How do you determine what's the
best recommendation for an ultra high networth portfolio line portfolio
who maybe they're not all that familiar with alternatives, but
they want to diversify and have a little bit more
(15:08):
of non correlated returns.
Speaker 5 (15:11):
So I think we are blessed at Goldman Sachs to
have the benefit of our CIO and our investment strategy group.
So that's sort of where we start writing a conversation
with a client, which is how much of the portfolio
should we have in alternatives? And we need to look
a lot of factors in terms of risk tolerance, tolerance
for illiquidity, what are they looking to derive from that
portion of the portfolio. But sort of as a starting point,
(15:33):
we talked a little about this earlier. We would talk
to a client who has a moderate risk appetite about
having twenty seven percent alternatives, and so we'd have that
conversation around does that feel right? Is that the number
that we want to get to? And then once we're there,
then it becomes how do we get there? Because that's
actually the really hard part and alternatives.
Speaker 3 (15:50):
When you say how do we get there?
Speaker 2 (15:51):
How do we over time allocate from some other bucket
into the Olds buck exactly.
Speaker 5 (15:57):
And the complication is traditional private alternatives are capital commitments
that generally call down capital and make investments over five
to ten years, and so there's a lot of art
and science of how do you get to twenty seven percent?
In alt right, it's going to take you five, seven,
ten years to get to that target as you sort
(16:18):
of ladder into these different commitments that you make. So
we spend a lot of time with clients talking about
that process.
Speaker 2 (16:26):
So I'm very familiar with capital calls, typically from venture
capital funds, occasionally for some oversubscribe funds, that you do
all the docks and then you wait for a window
to open up where they'll take your money. I don't
usually think of private equity of private credit in those terms,
but you have a whole lot more experience in this
(16:48):
space than I do. Is that what typically takes place
Someone says, hey, I want to commit up to ten
million dollars to this fund.
Speaker 3 (16:56):
How long does it take for those capital calls to
come in?
Speaker 2 (16:59):
How long is the client waiting? And then what are
they sitting in while they're waiting? Are they just sitting
in treasuries?
Speaker 5 (17:05):
And this is where alternatives are complicated, right? So if
you thought we'll talk a little bit about where alternatives
are going, right and when we talk about evergreens and
open ended which kind of get rid of that capital
called dynamic, But if you thought about ultrahigh network clients
who historically and continue to really invest in traditional closed
down alternatives. You need to be very close to that
(17:26):
client and how you build that portfolio year and year
out making commitments they are going to call capital in
private equity, in private traditional private credit funds, in real
asset funds. General is a ten year fund and they're
making investments over the first five years and trying to
harvest those over the second five years. And so our
job as advisors to our clients is how do we
build that laddered portfolio. How do we commit every single
(17:48):
year so that when we get to five to six
years in you hopefully have a self funding portfolio and
hopefully you have money you're invested. Capital is getting you
to that twenty seven percent of your portfolio in the ground,
but it's hard to get there, and so we spend
a lot of time advising clients on how to how
to build those portfolio.
Speaker 2 (18:06):
So typically, all right, I have fifty million dollars, I'm
going to put ten million. I'm going to commit ten
to this. How long will it take before about five
years before that's fully general? And then what are am
I sitting in treasuries or money markets?
Speaker 3 (18:20):
What am I doing in the meeting?
Speaker 4 (18:21):
Then you're diluting your return right. And so this is
the other part.
Speaker 5 (18:24):
You need to be really fully invested other than what
you think the short term capital call needs are. So again,
this is where the complexity comes in, which is how
do I not have drag and make sure I'm fully
invested right, but still have liquidity to fund a capital
that might come up the next month. And so that's
where our advisors spend a lot of time with clients
on making sure that we're not sitting in cash while
(18:44):
we're waiting for capital calls.
Speaker 2 (18:45):
So ten million over five years sounds like two per year.
So in other words, it's not like I'm going to
allocate that money to this, correct I just am anticipating
a call for each of the next five years for
about two million, and the money is already invested rather
than sitting around waiting for this exactly.
Speaker 3 (19:04):
It's a lot of moving parts.
Speaker 4 (19:05):
It's a lot of moving parts.
Speaker 5 (19:06):
But by the way, but that's what leads to when
you think about opening up the aperture and trying to
make alternatives more accessible. What you've seen over the last
few years is this incredible innovation around different structures that
are catering to individual investors. So if you think about
evergreen and open ended alternatives, you take away the complexity
(19:27):
of capital calls and distributions and managing liquidity because that
all gets done then within the vehicle, and there's trade
offs to that. But that's where you're seeing over the
last five years a tremendous amount of growth in alternatives
targeted at individual investments.
Speaker 2 (19:42):
So you might be giving up some performance in exchange
for a whole lot more simplicity exactly. So let's shift
from the process of allocating and getting calls to the
actual ALT managers. I'm assuming you have dozens and dozens
of not hundreds on your platform, some in house, some
outside of the firm. How do you start the process
(20:04):
of figuring out what do we want this spread of
managers to look like?
Speaker 5 (20:08):
Yeah, so that's what I think we spend a lot
of time focused on. I think our north star is
how do we have the best platform of opportunities for
our clients, and so one I think that starts with
diversification right across a number of different vectors. So one
is we talked about the different strategies under the ALT banner.
We need to have different opportunities in each of those
(20:30):
lanes buy out, growth, venture, private credit, real assets, right.
And then we want to be open architecture for our clients, right,
so meaning.
Speaker 3 (20:40):
Not just gold Man, not just gold Man.
Speaker 5 (20:41):
So product we have, as we talked about, a phenomenal
alternative capability over five hundred million dollars in assets under management.
We have a thirty plus year track record, and we
have strategies that span all those various alternabasset classes. So
that's one way we implement for clients. The other is
open architecture. So we have vehicles where clients can invest
(21:03):
in different fund of funds, different strategies like our Secondari's funds,
our co investment vehicles, and then lastly curating direct access
to some of the best alts managers out there on
a single name basis. And so there's different ways that
clients can actually implement their portfolio right across those three
different implementation methods.
Speaker 2 (21:24):
So it's interesting we're talking about diversification and lack of correlation,
and I'm really hearing two distinct types of diversification. One is, hey,
these aren't public stocks, they don't follow that cycle, so
you should get some sort of non correlated returns. But
within each of the major subgroups of alternatives, and then
(21:48):
across those groups, this should be somewhat non correlated. Is
that is that affair of someone uncorrelated?
Speaker 3 (21:54):
Yeah?
Speaker 5 (21:54):
Look, I think what clients are looking for in alternatives
is diversification, so different return drivers than what they're getting
from public markets, hopefully, a lack of correlation to those markets,
and alpha to those markets, meaning outperformance relative to what
they otherwise would have gotten had they gone in the
public markets.
Speaker 4 (22:15):
Right.
Speaker 5 (22:15):
So, when we think about returns and alternatives, some of
it is absolute, right, so what type of returns are
those managers underwriting to in the portfolio? And that's an
absolute target, But then there's also a relative target, which
is how do we think about the premium you're getting
for that illiquidity? Right, So, if I'm going to tie
my money up for in a ten year private equity fund,
(22:36):
I want to be paid for that illiquidity. And so
then we think about am I getting several hundred basis
points a year better return then had I put that
money in at the same time and we're taking the
money out at the same time from the relevant public
market benchmark, Right, then I think I've been rewarded if
I've gotten three hundred basis points a year or something
(22:56):
in that ballpark better than the public alternative, and then
maybe you would say it was worth it for that.
Speaker 4 (23:01):
Inliquidity, well, that's the.
Speaker 2 (23:02):
Whole idea of the liquidity premium, right that not only
are you getting paid for illiquidity, but it becomes a
somewhat less efficient market, which means there's greater opportunity for
upside exactly.
Speaker 5 (23:15):
I mean, look, the private markets, they have a lot
more information than the public markets. Many strategies they have control, right,
so they can actually change the outcome at their portfolio companies.
They can change management, they can change strategy, a lot
of different ways to drive return that are not available
in the public markets.
Speaker 4 (23:33):
Right.
Speaker 2 (23:34):
So, given the fact that information is so important and
so different than publicly traded stocks and or bonds, how
do you start out doing the due diligence that has
to be like a giant lift, especially if you have
a few hundred managers on the platform.
Speaker 4 (23:51):
Yeah.
Speaker 5 (23:51):
Look, I think most investors need to seek the help
of a professional organization that can help them do that diligence.
So I think for us we have a group called
our External Investing Group it's over four hundred people globally,
it's two hundred and fifty people doing manager selection and diligence.
And so we like to deploy that team to do
(24:12):
the fiduciary diligence and all the outside managers that we're
partnered with, and that's a pretty intense process, right, Each
manager is going to take a couple months to do
the diligence. It's going to go through an investment committee process.
And as you know, like you look at a track
record from a manager, you really need to dig in
and understand kind of what's behind that track record, right,
lots of caveats sometimes, and so that's the work that
(24:35):
they're doing and going to their investment committees and getting approval.
So we work with that team to diligence the managers
that we think makes sense for our clients.
Speaker 2 (24:42):
So I'm going to guess there's some analysts, some lawyers,
some compliance people, some regulatory specialists. Like this isn't the
sort of thing that the average investor.
Speaker 3 (24:51):
Can undertake on their own.
Speaker 2 (24:52):
You really need a team of professionals to dive in.
Speaker 5 (24:55):
I think you want to have the advice of professionals.
The other part that we've found as we talk about
diversification being so important. So when we think about an
individual investor, I always think there's a couple of vectors
of diversification for them. One is diversification of strategy, which
you talked about under the al umbrella number two, diversification
by manager, right you want to work with different managers,
and then diversification by vintage year. So we think it's
(25:18):
very important for clients to be pretty programmatic about making
allocations every single year, because again, you don't want to
market time. You don't know when the best opportunities are
going to be, and actually it's usually when times feel
the worst is probably the best time to be allocating, right,
And so you know, and then when you dial that back,
you might be needing to make ten commitments a year,
(25:39):
fifteen commitments a year. How can you diligence enough managers
to decide that you've picked us the best one, right,
And so it gets very challenging and very complicated, and
that's why you see a lot of individual investors partnering
with an advisor or an advisor that has diligence capabilities
to help navigate them through who are the best managers
in each of their each of those lanes.
Speaker 2 (25:57):
So diligence is the first step, and that is all
the legal and the paperwork that has to be done.
Let's talk about risk assessment. How do you figure out
when you're looking at a variety of different investment strategies
and managers, Hey, how much bang am I getting relative
to the risk the client is assuming in this investment?
(26:19):
It would it would seem that's really challenging.
Speaker 4 (26:22):
Also, yeah, look, I mean there's things that you need
to look at.
Speaker 5 (26:25):
Obviously, you're going to look at the track record over time,
and you're going to look at the stability of the
team and do they have all the fundamental things that
lead to a repeatable investment process, right, which should argue
that you can rely on that track card as being
hopefully something that you could look at that could be
repeatable in the future.
Speaker 4 (26:41):
Right.
Speaker 5 (26:43):
I think the other important part is what's the concentration
of that strategy?
Speaker 1 (26:46):
Right?
Speaker 5 (26:46):
How many investments are they making? Is it highly concentrated,
is it more diversified. So, for example, one thing that
our clients have been long time investors in is secondary
private equity. And one of the interesting things about sexonies
is underneath one single fund, you may have thousands of companies,
so you have a tremendous amount of diversification. And because secondaries,
(27:09):
if you thought it secondary private equity, it's already partially invested.
So most traditional private equity funds it's a blind pool. Right,
you're committing capital that's going to investor in the next
five years. Secondaries allows you to take a look at
some of the money that's already in the ground and
actually buy that theoretically at a discount to it fair values.
Speaker 4 (27:26):
Right.
Speaker 2 (27:26):
So there are two types of secondaries that I'm familiar with,
and I want you to comment on this. One of
them is, Hey, a co investor in a fund suddenly
has a change in their liquidity needs, and hey, we
will want to sell this for you know, fifteen percent
discount from what the last closing date was, so you
get to buy in an earlier vantage at a discount.
(27:49):
That's one secondary you Is that something you were talking about.
Speaker 4 (27:53):
Yes, So that's an LP secondary.
Speaker 3 (27:55):
Right.
Speaker 5 (27:55):
Could be a big institution that for whatever reason wants
to do so that earlier this year he bounce their portfolio,
big university that as liquidity needs, right, we'll look to
go and get liquitting in the secondary market be individuals,
So that's sort of a traditional LP secondary.
Speaker 2 (28:09):
So the other thing I occasionally see is, hey, one
of our portfolio companies suddenly is adding this or pivoting
in this direction, and we're comfortable with how much US
as a fund they're putting into this company, and we're
going to continue maintaining this investment, but they need additional capital.
Speaker 3 (28:27):
Do you want to do well one off.
Speaker 2 (28:29):
Side pocket or people call it all sorts of different things.
How often you see that sort of thing coming?
Speaker 5 (28:34):
Yeah, So the other so when you look at the
secondary market, you have the LP secondaries, which you just
talked about. The other would be GP led secondaries. So
that's not initiated by the LP of the fund. It's
actually the manager of the fund to your point, saying, hey,
we have a company that we don't want to sell
right now. We want to continue to own, but we
need to find new capital to fund it. Right So
you might want to take out some of the old investors,
the GP might want to roll their capital, roll their
(28:56):
incentive fee. So that's the GP LED secondary also to
continuation vehicle. Many times you're hearing a lot about this
and so that's another part of what we do within
our secondary franchise that our clients have exposure.
Speaker 3 (29:08):
To really really interesting.
Speaker 2 (29:10):
Coming up, we continue our conversation with Kristin Olsen, Goldman's
global head of Alternatives for wealth, discussing the state of
alternative investing today.
Speaker 3 (29:20):
I'm Bury Results.
Speaker 2 (29:21):
You're listening to Masters in Business on Bloomberg Radio. I'm
Bury Results. You're listening to Masters in Business on Bloomberg Radio.
(29:42):
My extra special guest is Kristin Olsen. Kristen is the
global head of Alternatives for wealth management clients at Goldman Sachs,
a position she's held for twenty four of her twenty
seven years at Goldman. So before we get into the
state of altern of investing today, I'm fascinated by this
(30:03):
big survey you guys do each year. Over a thousand
clients and other people participat in it, and some of
the answers that come along are kind of expected, some
are really kind of surprising. Let's go over a few
of these because they're really fascinating. So, first, your survey
reveals wealthy individuals adopt alternative investments as their net worth grows.
(30:28):
That wasn't a surprise surprising but some of the specifics,
some of the percentages were really really like wow, look
at that. Tell us a little bit about the response
you get to that survey question.
Speaker 5 (30:40):
Yeah, so well, first I would say, this is our
inaugural survey, So this is the first time that we're
actually surveying a broad universe.
Speaker 3 (30:47):
Put me on that list.
Speaker 2 (30:48):
I want to see that data every year. I'm a
junkie for that sort of stuff, and I think.
Speaker 5 (30:52):
Part of the impetus for that too is just what
we've talked about, sort of the incredible interest by individual
investors and figuring out should they invest in alternative how
do they invest in alternatives? And so that was sort
of the impetus to this, you know, opening the door
to alternatives survey that we just did. I think the
data that you mentioned is not surprising, obviously from my seat,
starting with ultra high net worth clients.
Speaker 4 (31:13):
Sure, it's been.
Speaker 5 (31:14):
Investing alternatives for you know, twenty five plus years. I
was surprised by down the well spectrum, the fact that
there's a fair amount of participation all the way down
to the you know, one to five million dollar clients, right,
And I think as it becomes easier for these individuals
to invest in alternatives, and as there's more education around it,
(31:34):
those numbers are going to continue to go up.
Speaker 2 (31:36):
So I'll tell you what surprised me at first, blush,
and then as I thought about it, made a lot
of sense. Millennials are at the forefront of a significant
shift in investment behavior towards ALTZ. And as I began
to think about it, hey, these are the kids who
more or less came of age right into the Great
Financial Crisis. They're like, wait, stocks can go down also,
(32:00):
So I'm not terribly surprised by that once I thought
about it. But still, how significant of a shift is this?
Speaker 5 (32:07):
Look, I think we're it's fun to watch. Obviously we're
just starting to see it and you know, digesting the
survey results. But you know what I one part I
think about as millennials is their interest in accessing innovation, right,
Like this is a digital first generation, no doubt. And
so when you think again to our earlier comments, how
do you access innovation in healthcare in tech? A lot
(32:28):
of that is in the private markets, right, And so
I think part of that also might be the reason
why you see millennials, you know, being more inclined to
alternatives and being sort of kind of this shift in behavior.
Speaker 2 (32:41):
So let's talk about the percentage of people whose wealth
is professionally managed. And obviously the data set that this
question goes to is pretty significant. But fifty nine percent
of wealth amongst a thousand individual surveyed were professionally managed.
And I kind of scratched my head that because my
(33:01):
assumption has been amongst the ultra wealthy, it's even higher
just as a matter of a and I have time
or interest in this. Amongst most people, they're running their business,
they're continuing to accumulate more wealth. But I'm curious about
who was the data set this one went to, and
what do you think of that fifty nine percent number?
Speaker 3 (33:21):
High, low, somewhere in between.
Speaker 5 (33:22):
Well, so it went to one thousand investors million dollars
of investable assets plus and twenty five years old or older.
Speaker 3 (33:31):
So not necessarily Goldman Sachs call.
Speaker 4 (33:33):
Not necessarily the ultra high networth.
Speaker 5 (33:34):
And frankly, part of the intention was to try to
get a better sense for the broader individual market, not
just the ultra high networth market. I think, you know,
we have a long history in our wealth business. We
know the ultra high network space very very well. And
I think in that space, if we were to run
the survey, I mean very high percent ninety exactly right.
So my guess is that not professionally managed peace are
(33:56):
more self directed at the lower end of the well
spectrum would be my gaes and maybe younger.
Speaker 2 (34:01):
Right when you see black Rocket twelve trillion and Vanguard
at eleven trillion, Hey, someone's running their own portfolio. So
what would make sense forty one percent or so of people,
if not more doing it. It's really interesting to think
about what is the mass affluent doing, what is the
high net worth doing, what is the ultra high net
worth and multi family office doing. I think as you
(34:23):
go up that scale, is it's safe to say most
of them are working with professional advisors? Is that that
would be?
Speaker 5 (34:29):
That would be my guess for sure. The other part
is if they're self directed. And there's some of the
other survey data that also shows that, I think something
less than fifty percent of advisors have even brought up
alternatives with some of that's really interesting, right, And so
you have the self directed that probably are not accessing alternatives,
could very hard to do that without an advisor. And
then you only have something less than fifty percent of
(34:51):
advisors bring up alternatives like this is where the opportunity
is right on educating the advisors to feel more comfortable
talking to investors about altern internatives, and obviously the educating
the investor and investors.
Speaker 2 (35:03):
So one of the questions you ask led to an
answer that I adore because I'm constantly saying to not
only the.
Speaker 3 (35:12):
People I work with, other people.
Speaker 2 (35:15):
Your clients aren't telling you the truth. They have money
away from you. Your wild share is much lower than
you realize until you're with the same advisor for five
or ten years and the client is comfortable in shares.
But I love this data point. Households with ten million
dollars and up in investable assets typically engage two different
(35:36):
advisors compared with one advisor at the mass affluent and
high net worth groups. Tell us a little bit about
that dual advisor approach. These are We're not saying two
people at the same firm. These could be two completely
different firms.
Speaker 5 (35:51):
You know, I think as people go up the well spectrum,
they want to have different options, different viewpoints. You know,
have some capital at different organized, different.
Speaker 2 (35:58):
Firms, a little diverse internally exactly.
Speaker 5 (36:02):
I do think though from my experience on the well
side Altra Hinder recite at Goldman, it does tend to
be that over time though, there is a lead relationship, right,
And I think as you get higher up the well
spectrum and you have more complexity in your portfolio, a
lot of that, namely coming from alternatives, it becomes more
and more imperative to have somebody that's the quarterback or
(36:24):
the driver, you know, in the pole position, as opposed to,
you know, as opposed to two people both managing parts
of the portfolio.
Speaker 3 (36:32):
No one overlap.
Speaker 2 (36:33):
You don't want, you know, one overlap.
Speaker 5 (36:35):
And you also want you know, we talked about how
hard it is to build these alternative portfolios, you know,
doing that in two places, and how are you managing
the liquidity and how are you knowing how you're actually allocated? Overall,
I think you start to see this shift to one
advisor really being the lead advisor and the other advisor
maybe being a secondary advisor.
Speaker 2 (36:53):
So as much as I thought that was a fascinating
data point, this one kind of terrifies me. Millennials site
social media more often, while boomers rely on traditional media
outlets for their investing and financial planning information. Social media
really well.
Speaker 5 (37:13):
You know one of the things that I say, and
I'm not definitely not a millennial, but you know, if
you going on your LinkedIn feed, you see videos or
you know, on Instagram from major alternativesting firms, right, and
so you can see why. I don't know what percent
of their time they're spending on social media, but naturally
these ads and these videos are getting served up to
them there, so it seems logical to me then that
(37:36):
that's where they're going to.
Speaker 2 (37:37):
Well. LinkedIn is probably the most credible of all the
social media outlets, but I think of TikTok and Instagram
and Twitter. A couple of years ago, the IRS put
out a list of forty tax statements that they had
culled from various social media that were wrong, some of
(37:58):
which would lead to penalties, interest or jail time if
you followed them. And they literally forty here are forty
one things that we got from social media. Do not
do any of these things. So that's why I say,
I get a little nervous when I see millennials with
citing social media. LinkedIn, of all the places, seem to
be the most credible because it's business oriented, not some
(38:21):
wacky guy telling you that if you're on a boat
offshore on April fifteenth, you don't know any taxes. That
was the one that really stayed out with me, right,
all right, So that's all I have to do is
just be out on the water at fifteenth could save
myself a lot of money.
Speaker 5 (38:35):
I mean, look, I think it all goes back to
the number one thing that I think we're focused on
with respect alternatives and individual investors, which is education, right absolutely,
and so you know, hopefully they're not getting their education
off of TikTok, but you know, all of all of
us need to think about how do we better educate
around the role of alternatives, the risk of alternatives, how
(38:58):
you invest in alternatives. And so I think we're spending
a lot of time thinking about advisor education and client
education and by the way, education that we roll out
on social media, right because if that's where they are.
Speaker 3 (39:08):
Right, you got to meet them where they are.
Speaker 4 (39:10):
That's where we're going to have to put the education.
Speaker 2 (39:12):
So let's bring this back around to alts today. Let's
talk about themes. What are you most excited about in
private markets? What's new? Interesting and you know thrilling. Can
I use the word thrilling about alts?
Speaker 5 (39:24):
Well, look, I think when you say thrilling, I think
about all what are you enthusiasts innovation that's happening right
now in technology? Obviously, how can we have a podcast
and not mention AI on any topic.
Speaker 3 (39:37):
I'm not familiar with it. Tell me a little bit.
I haven't heard enough about that.
Speaker 5 (39:40):
But look, I think that what we're seeing in terms
of the incredible advances in AI is bringing back a
lot of risk appetite to invest in venture and in
growth and to participate in what they think is going
to be you know, transformational technology advancements you know around AI,
and that permeates not just the venture tech and growth space,
but how AI is going to transform additional businesses. Right,
(40:03):
So I think that segment is quite interesting. And then
a lot of the other things that we think are
interesting are a little more not thrilling, which was the
word you use.
Speaker 2 (40:13):
Maybe that's the wrong word, but what's really interesting with
great growth potential? Well, look that's thrilling too.
Speaker 5 (40:19):
So look, I would say we talked a little about secondaries.
We really like secondaries because again, if you think about
the primary alter markets growing right, more money is going
to alternatives. That naturally means the secondary market's going to
grow right to spill over. It's correlated to the growth
of the primary markets and alternatives. So there's me more
opportunity there, and we really like the risk return for
(40:40):
clients there in that segment. So I think that's one
space that we very much like. What else would I say?
Speaker 2 (40:48):
You mentioned real assets, and very often when you talk
about real assets I think that has morphed over the
past decade and evolved. I used to think of real
ass that says timber or coal or whatever, but now
it's things like infrastructure and data centers, laboratories and healthcare.
(41:10):
Tell us a little bit about what the real assets loft.
Speaker 4 (41:13):
Yeah, that's where I was going to go.
Speaker 5 (41:13):
I would say for our clients, I think for a
long time, real assets was real estate, right. I think today,
if you wanted to talk about some of the more
interesting parts, it's the things you alluded to, which is
what's happening in infrastructure. Infrastructure is one we're spending a
lot of time with our clients on. Because institutions have
invested for a long time in infrastructure assets. Individuals less
so and so trying to understand the rule of infrastructure
(41:35):
and a portfolio which has a lot of unique benefits.
Speaker 4 (41:37):
Right.
Speaker 5 (41:37):
A lot of times it's not correlated to GDP growth. Right,
This is a lot of times critical infrastructure things that
we need to do. It has inflation protection benefits, right,
something we didn't need to talk about inflation ten years ago,
but now, you know, how do we think about things
that are inflation protected with long term contracts with built
in escalators. And then the other part is educating around
It's not your grandfather's infrastruct sure, right, people tend to
(42:01):
think right about bridges and toll roads, right, exactly Today
it's the things you talked about. It's digital infrastructure, it's
data centers to support AI, you know, right, it's energy transition, right,
It's a lot of the very I guess maybe the
more thrilling parts of investing are actually in the infrastructure
asset class, and so that is part of the real
assets that's grown a lot and where there's a lot
(42:22):
of interest.
Speaker 2 (42:23):
I wish I can remember where I read this somewhat
technical piece because we always talk about AI, but you
alluded to AI plus another sector of all the different
parts of the economy that AI is going to have
a big impact. This author had made the claim. I
read it like two weeks ago. So it's gone that
(42:44):
AI and genomics, oncology and healthcare are going to be
amazing because what you can do with AI in terms
of testing new molecules and new treatment regimes is just
a whole other less Are you looking at AI plus
another sector or is it just all AI all the time?
Speaker 5 (43:06):
No? Definitely plus other sectors. And you're completely on point
that life sciences hows that can be impacted by AI
healthcare right and by the way, every sector in the
economy is likely going to be impacted. So you know,
how do when you look at this best your diligence question,
you look at private equity firms that you're diligencing today,
how what kind of value creation playbook do they have
(43:27):
for their portfolio companies and how are they thinking about
the AI opportunity or threat for their portfolio companies?
Speaker 4 (43:34):
Right?
Speaker 5 (43:34):
So it's going to infuse really all the different sectors
of investing within alternatives.
Speaker 2 (43:40):
So what other alternative strategies are you seeing the most
demand for clients? Like I'm enthusiastic about AI and life sciences.
Are people asking for real assets or for infrastructure or
for sec Like, what are you hearing from the bottom up?
Speaker 4 (43:56):
Well, that would be private credit.
Speaker 2 (43:58):
Really yeah, response to a relatively low rate and correct.
Speaker 5 (44:02):
What I would say, what we're hearing from clients for
the last few years has been a search for yield.
It desire for yield, and that's led to a lot
of interest from the bottom up in private credit. Right
a place where you can be top of the capital structure,
so a lot of protection below you and get yields
that are high single digits with quarterly cash flow. That's
(44:23):
been an area of pretty broad interest across the well
spectrum in alternatives.
Speaker 3 (44:29):
Huh really really interesting.
Speaker 2 (44:30):
So last question before I get to my favorite questions
that I ask all my guests when it comes to alternatives.
What are investors not talking about or thinking about, but
perhaps should be. What sort of it could be asset
data point policy, what's important that they might be overlooking?
Speaker 5 (44:51):
I guess the thing that comes to mind for me
right now and we think about the advent of all
these evergreen, open ended perpetual perpetual f funds, and there's
been a lot of enthusiasm a lot of growth in
some of the sectors. Our investors spending a lot enough
time thinking about how big some of these vehicles are getting,
and then what does that actually mean in terms of
(45:12):
how much origination that they need to have to be
able to deploy the capital? Right, because in these evergreens,
if you don't actually have if you have more capital
coming in then you can actually invest, You're going to
start diluting your returns, right, You're going to have cash drag.
And so you know, our investors spending time and thinking
about who they're investing with and do they have enough
origination capabilities to be fully invested in high quality investments.
(45:35):
So I think that'd be one thing that I would
think about. The other thing that I'm interested to see
how it evolves is, you know, we're new in this
perpetual evergreen alt space, you know, last five years. You know,
how do we start to see performance divergence over the
next five years?
Speaker 1 (45:50):
Right?
Speaker 5 (45:51):
I don't think we've seen a lot yet because we're
still in the early innings, and so I'll be curious
to see how investors react to performance divers or negative
performance on some of these and what happens do we
see redemptions or are investors long term minded? And do
they stay the course?
Speaker 3 (46:08):
Huh? Really really interesting.
Speaker 2 (46:10):
Let me jump to my favorite questions that I ask
all of my guests, starting with something that you hinted
at but didn't expand on. Tell us about your mentors
who helped shape your career.
Speaker 5 (46:23):
So I have to mention Eric Lane. So he was
the one who won me in the Analyst draft and
I then worked with him for decades and I owe,
you know a lot of my success to Eric, and
part of it is we sat in like a trading
desk type of format when I started, and the benefit
(46:45):
of that was just getting to hear him on the
phone every day with clients and see how he managed
difficult situations, how he explained things. You know, there's an
ability to sort of really apprenticeship right next to him.
And the other thing that I just really loved about
working with Aaron, and maybe maybe I hate it at
the time, was he would throw you into situations that
you felt ill prepared for, but he knew you could.
Speaker 4 (47:07):
Handle deep into the pool exactly.
Speaker 5 (47:10):
And sort of just forced you to go into the
situations that you may have not thought you're ready for.
And that really allowed you to sort of step function
I think, improve in your job and really learn, and
then he was always there to support you if it
didn't go as well.
Speaker 3 (47:23):
As you really really super interesting. Let's talk about books.
What are some of your favorites? What are you reading
right now?
Speaker 5 (47:29):
So I've really been enjoying the Walter Isaacson biographies, and
we talked a little about life sciences.
Speaker 3 (47:35):
And one that I I was going to say, which
one of you?
Speaker 2 (47:38):
So I have Leonardo sitting on a night table out
east waiting for me to have gotten to that one.
Speaker 3 (47:47):
What it's like, it's a giant.
Speaker 4 (47:48):
Yeah. So I actually just finished the one on Elon Musk.
Speaker 3 (47:51):
Huh.
Speaker 5 (47:52):
But the one that I really liked was Codebreaker about
Jennifer DOWDNA discovered Crisper.
Speaker 2 (47:58):
All right, next question, what are you streaming these days?
Give us your favorite podcast? Netflix, Amazon Prime? What's keeping
you entertained?
Speaker 5 (48:07):
I just started watching an old series I'm only two
episodes in, which is Scandal. So that's what I'm watching
right now, Little Washington, d C Intrigue. In terms of podcasts,
of course, all the Bloomberg podcasts, and you don't have.
Speaker 2 (48:22):
You don't have to do that.
Speaker 5 (48:23):
That's if I were to say one that I listened
to from time to time just for some comedy, SmartLess.
Speaker 3 (48:30):
I love that.
Speaker 2 (48:30):
I'm a big fan of just Justin Batement, Jason Bateman,
you his sister Justine.
Speaker 4 (48:35):
It was a great guest and they're so funny.
Speaker 2 (48:37):
So I've interviewed Michael Lewis a million times, and after
his daughter was killed in a car accident, they had
him on and it was a few months later and
he describes the grief process. He's just such an extraordinary
human being. To listen to someone share that it was,
it was both amazing and terrible the same time. But
(49:01):
they're always fun and they all seem to torment each other.
They're very amusing. Final two questions, what sort of advice
would you give to a recent college grad interested in
a career in either alternatives or wealth management.
Speaker 5 (49:16):
Well, I think that the benefit that a recent college
grad has is there's so much information at their fingertips
to get smart and to get be interested, and to
learn about the industry before they come into it, and
to be really well educated. You know, it was a
lot harder twenty seven years ago. Right now, everything's at
their fingertips. So I think be prepared and then don't
be scared to network right, user relationships, meet people, reach out.
Speaker 4 (49:40):
I think that would be the best advice.
Speaker 3 (49:41):
Really really good.
Speaker 2 (49:43):
Final question, what do you know about the world of
alternative investing today would have been helpful back in two
thousand when you were moving into this space.
Speaker 5 (49:51):
Well, I think about it a little bit personally, which
is you know, we have evolved a lot in how
we advise clients to INVESTMENTULTI where we talked about the process,
how do you think about sizing and building it out
year and year out? And if I look back to
what I started, I definitely didn't have that rigor in
my own personal investing in alts and definitely undersized, was
not diversified enough. And so I think I wish all
of the rigor we've put into it I had known
(50:13):
back then in terms of how we were building portfolios
personally and for our clients.
Speaker 2 (50:18):
Really super interesting, Kristin, Thank you for being so generous
with your time. We have been speaking with Kristin Olsen.
She's Goldman Sachs's global head of Alternatives for Wealth. If
you enjoy this conversation, well, be sure to check out
any of the five hundred and sixty eight we've done
before over the past eleven years. You can find those
(50:40):
at Bloomberg iTunes, Spotify, or here on YouTube or wherever
you find your favorite podcasts. And be sure and check
out my new book How Not to Invest The Ideas, numbers,
and behaviors that destroy Wealth and how to avoid them
How Not to Invest at your favorite bookseller.
Speaker 3 (50:59):
I would be.
Speaker 2 (50:59):
Remember if I do not thank the Crack team that
helps with these conversations together each week. Alexis Noriega is
my video producer. Anna Luke is my audio producer. Sean
Russo is my head of research. Sage Bauman is the
head of podcasts here at Bloomberg.
Speaker 3 (51:16):
I'm Barry Ridholts.
Speaker 2 (51:18):
You've been listening to Masters in Business on Bloomberg Radio.
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