Masters in Business• Nov 13, 2025• 51:41Interview

Alternate Investing: Masters in Business with Kristin Olson | Masters in Business

From Masters in Business

Kristin Olson•Global Head of Alternatives for Wealth, Goldman Sachs

Executive Summary

Alternative investments are becoming a core holding for wealthy individuals, driven by companies staying private longer and the search for yield and diversification.
Goldman Sachs is a major player, managing over $500 billion in private assets and recommending a significant allocation (e.g., 27% for moderate-risk clients) to alternatives.
The traditional 60/40 portfolio is being challenged, with a '60/20/20' model (60% equities, 20% fixed income, 20% alternatives) emerging as a new standard for diversification.
Due diligence in private markets is complex and resource-intensive, requiring large, specialized teams to assess managers, strategies, and risks, making professional guidance essential for most investors.

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Concerns Raised

A knowledge gap exists, with less than half of financial advisors actively discussing alternative investments with clients.
The risk of performance dispersion among evergreen funds is increasing, requiring careful manager selection.
Excessive capital inflows into large alternative funds could dilute returns if not matched with sufficient high-quality investment opportunities.

Opportunities Identified

Capturing a significant illiquidity premium, estimated around 300 basis points per year, over public market equivalents.
Gaining exposure to major economic trends like the energy transition and AI development through private infrastructure and growth equity.
Strong client demand for yield continues to create attractive opportunities in the private credit space.
The growing secondary market provides unique entry points and liquidity options for private equity investors.

Key Themes

The Mainstreaming of Alternative Investments

Alternative investments like private equity, private credit, and infrastructure are shifting from a niche asset class to a core component of high-net-worth portfolios. This is driven by the shrinking public market and the need to access economic growth from the vast number of private companies.

This trend fundamentally changes modern portfolio construction, forcing investors and advisors to develop expertise in illiquid, complex assets to achieve diversification and capture potential outperformance.

Rethinking Portfolio Allocation

The classic 60/40 stock/bond portfolio is increasingly seen as insufficient. The discussion highlights a move towards a '60/20/20' model, which incorporates a substantial, permanent allocation to alternatives to enhance returns and provide non-correlated sources of growth.

This signals a strategic shift in asset management, where understanding and accessing private markets is becoming as critical as managing public equity and debt exposures.

The Criticality of Professional Due Diligence

The private markets are information-poor and complex compared to public markets. Goldman Sachs's 400-person external investing group exemplifies the immense resources required for proper manager selection, risk assessment, and legal review, a process that is prohibitive for individual investors.

It underscores the value proposition of large wealth management platforms and highlights the significant risks for investors who attempt to access alternatives without professional, fiduciary-level diligence.

The Evolution of Private Market Strategies

The alternatives landscape has matured significantly, offering a broad spectrum of strategies beyond traditional buyouts. Key growth areas include private credit (driven by yield demand), modern infrastructure (data centers, energy transition), and sophisticated secondary markets (both LP- and GP-led) that provide liquidity solutions.

Investors now have a more diverse toolkit within alternatives, allowing for more granular portfolio construction but also requiring deeper expertise to navigate the nuances of each sub-asset class.

The Impact of Technology and AI

Technological advancements, particularly in AI, are a major theme influencing private market investing. AI is creating new opportunities in venture and growth equity, driving demand for digital infrastructure like data centers, and has become a critical due diligence question for evaluating any private equity manager's strategy.

This shows that even in private markets, technology is a primary driver of both risk and opportunity, and investors must assess how managers are incorporating AI into their value-creation plans.

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Topics

Alternative Investments Private Equity Private Credit Wealth Management Goldman Sachs Portfolio Allocation 60/40 Portfolio Due Diligence Illiquidity Premium Venture Capital Growth Equity Infrastructure Investing Secondary Markets GP-led Secondaries AI in Finance

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