Alternate Investing: Masters in Business with Kristin Olson

Episode Summary

Executive Summary: Barry Ritholtz interviews Goldman Sachs’ Kristen Olson about the rapid growth and evolution of alternative investments for wealth clients. Olson explains how private equity, private credit, secondaries, and real assets have become more accessible, why illiquidity can be worth it, how Goldman builds diversified alt portfolios, and why education, manager selection, and evergreen structures will shape the next phase of private markets.

Main Topics: Kristen Olson’s career path and Goldman background (Priority: 4/5): Olson describes joining Goldman straight from Georgetown, starting in investment banking, then pivoting into what became Goldman’s alternatives business during the dot-com bust. Her long tenure and apprenticeship under mentors shaped her expertise. The expansion of alternatives as an asset class (Priority: 5/5): The discussion breaks down the major segments of alternatives—private equity, private credit, hedge funds, and real assets—and explains how the category has matured and broadened over three decades. Portfolio construction and allocation targets (Priority: 5/5): Olson explains how Goldman thinks about alternative allocation ranges for clients, including moderate-risk portfolios, how funding sources differ by strategy, and why building exposure over time is more complicated than simply assigning a target weight. Manager selection, diligence, and diversification (Priority: 5/5): The conversation details Goldman’s due diligence process, the importance of diversification by strategy, manager, and vintage year, and why institutional-scale resources are needed to evaluate private-market managers. Secondaries and private market liquidity solutions (Priority: 4/5): Olson highlights LP secondaries and GP-led continuation vehicles as important tools that add liquidity, extend ownership periods, and allow investors to access already-deployed portfolios with meaningful diversification. Survey findings on wealthy investors and alternatives (Priority: 4/5): Ritholtz and Olson discuss Goldman’s inaugural survey showing broadening adoption of alts across wealth levels, rising millennial interest, the role of professional advisors, and how clients get their investing information. Current themes: private credit, AI, infrastructure, and evergreens (Priority: 5/5): Olson identifies private credit as a major demand area for yield, AI as a catalyst for venture and growth investing, infrastructure and data centers as evolved real-assets opportunities, and evergreen funds as an area to watch for scale and performance dilution.

Key Arguments: Alternatives are no longer niche; they have become a broad, mature asset class with multiple return drivers across private equity, private credit, real assets, and secondaries. For many investors, a meaningful alternatives allocation may be closer to 20% or more, with Goldman suggesting around 27% for a moderate-risk client. The hard part is not deciding on an alt target, but implementing it over time through capital calls, liquidity planning, and vintage-year diversification. Professional manager selection is essential because private markets require deep diligence, team assessment, and an understanding of concentration, control, and valuation. Secondaries offer a compelling risk-return profile because they can provide diversification, partial deployment visibility, and exposure to mature portfolios, often at a discount or with better information. Private credit has gained broad appeal because it offers yield, downside protection, and quarterly cash flow in a relatively high-rate but still yield-seeking environment. AI is reviving risk appetite in venture and growth investing, while also creating opportunities across sectors such as healthcare, genomics, and broader enterprise transformation. Evergreen and open-ended alt funds improve accessibility by reducing capital-call complexity, but investors should watch for cash drag, scalability limits, and future performance dispersion.

Data Points: Goldman Sachs private investing AUM: Over $500 billion - Olson says Goldman is one of the largest managers of alternative assets. Tenure at Goldman: 27 years - Olson describes herself as a Goldman lifer and has spent nearly three decades at the firm. Time leading the alt group: 24 years - She has run Goldman’s alternatives group for most of her career. Client allocation recommendation for moderate risk: About 27% in alternatives - Goldman’s current view for a moderate-risk client portfolio. Client allocation recommendation in 2001: About 20% in alternatives - Earlier baseline allocation Olson cites from the early 2000s. Average time to IPO: 10 years - Olson notes companies are staying private longer before going public. Survey sample size: 1,000 investors - Goldman’s inaugural alternatives survey included wealthy individuals with at least $1 million in investable assets. Survey eligibility: $1 million+ investable assets and age 25+ - Describes the respondent base for the inaugural survey. Professionally managed wealth share in survey: 59% - Among the surveyed investors’ wealth, this portion was professionally managed. Alternative investment structure horizon: 10-year funds - Traditional private equity, private credit, and real asset funds commonly follow a long-dated closed-end structure. Investment period inside a 10-year fund: First 5 years - Funds generally call capital and make investments over the first half of their life. Harvest period inside a 10-year fund: Second 5 years - Funds aim to monetize investments later in the fund life. Secondaries diversification example: Thousands of companies under one fund - Olson explains that secondaries can provide large-scale diversification beneath a single vehicle. Private credit returns: High single digits - Described as a typical yield target for many private credit investments. Research team size for diligence: Over 400 people globally; 250 in manager selection and diligence - Goldman’s external investing group supports manager evaluation and fiduciary diligence. Manager diligence duration: A couple of months per manager - Each outside manager may take months to diligence before investment committee review. Secondary market valuation: Discount to fair value - LP secondaries are often purchased at a discount relative to underlying value. Survey finding on advisors: Less than 50% of advisors have brought up alternatives - Olson points to advisor education as a major growth opportunity. Millennial behavior: Social media used more often for financial planning information - Survey finding discussed as part of the shift in how younger investors learn about alts.

Pivotal Quotes: "We would talk to a client who has a moderate risk appetite about having 27% alternatives." — Kristen Olson: Explaining Goldman Sachs’ current portfolio construction view for moderate-risk clients. "The hard part is how do we get there?" — Kristen Olson: On the complexity of building a target alternatives allocation over time through capital calls and liquidity management. "I think that would be one thing that I would think about: who you're investing with and do they have enough origination capabilities to be fully invested in high-quality investments?" — Kristen Olson: Warning investors to watch capacity and deployment discipline in large evergreen funds.

Implications: The conversation suggests alts are moving from institutional niche to core wealth allocation, but success depends on education, manager selection, and liquidity discipline. Investors should expect more access, more structures, and more complexity as private markets expand.