E41: How Everyday Investors Can Access Blackstone, Apollo, and KKR?

Episode Summary

Executive Summary: Michael Sidgemore discusses how private markets are moving into wealth management, enabled by platforms such as iCapital that connect fund managers with private banks and RIAs. He describes RIA growth, venture access challenges, Broadhaven’s fintech and fund investments, GP staking, and a difficult fundraising climate for emerging managers. He expects retirement-account access to accelerate private-market growth and reshape portfolio construction.

Main Topics: iCapital as private-markets infrastructure: Founded in 2013, iCapital helps GPs and wealth managers handle private-market investments from pre-investment through reporting and administration. It lowers practical access barriers by enabling smaller client allocations to funds traditionally built for institutions. RIA channel growth and independence: Advisors are leaving wirehouses to own more of their businesses, supported by independent platforms such as Focus, Hightower, and Dynasty. Private-market access is part of the infrastructure that makes independence more viable. Venture capital access for wealth investors: Wealth managers often lack the time, expertise, and relationships to assess venture funds, while top funds can be access-constrained. Sidgemore sees fund-of-funds vehicles and large, well-resourced RIAs as ways to source and diversify venture exposure. Broadhaven’s investment strategy: Broadhaven invests in fintech companies, commits to outside funds for diversified exposure, and incubates businesses. Its focus includes financial-services infrastructure and the evolution of private-market investing. GP staking and asset-manager growth: GP-stake investors can provide capital, succession support, and business-development or distribution help to asset managers. Sidgemore sees a particularly large opportunity among mid-market firms that have not yet sold stakes. Emerging managers and future private-market expansion: Fundraising is difficult for emerging managers, but reduced capital and right-sized funds may create attractive vintages for successful investors. Sidgemore also expects IRA and potentially 401(k) allocations to broaden private-market participation and change portfolio construction.

Key Arguments: The independent advisory channel is growing because advisors can retain greater ownership of their businesses while relying on third-party platforms for operational support and investment access. Private-market infrastructure reduces friction for both sides: GPs gain access to wealth-channel capital, and wealth clients can invest at lower minimums than the historically institutional-sized commitments. Access to venture is not simply a matter of investor demand; identifying high-quality managers and securing allocations are substantial obstacles. Fund-of-funds specialists and large RIAs with dedicated investment teams can help address them. GP stakes can offer asset managers more than liquidity: investors may support succession, recapitalization, hiring, and distribution, while gaining exposure to management-fee and carry economics. The fundraising slowdown may benefit emerging managers who select strong companies and keep fund sizes appropriate, though manager selection remains critical and access to top managers is difficult. Private markets may become a larger part of mainstream portfolios if retirement assets gain access. Sidgemore argues investors could organize allocations around private versus public markets, rather than treating alternatives as a separate bucket.

Data Points: iCapital assets: Over $170 billion by the end of 2023 - The guest cites this as evidence of iCapital’s scale and growth. iCapital founding and first wealth-channel product: Started in 2013; first product launched in 2014 - Timeline given for the company’s development. Traditional private-fund minimums versus wealth allocations: Historically $20–30 million or more; wealth clients may invest $100,000, $200,000, $500,000, or $1 million - Illustrates the gap private-market infrastructure aims to bridge. RIA asset growth: More than 13% - Sidgemore describes growth in advisor-managed assets at hybrid and independent RIAs over the timeframe discussed. Wirehouse headcount and asset growth: Headcount down about 1.5–2%; assets up about 7.5% - Comparison with RIA-channel growth over the same timeframe, as stated in the interview. Broadhaven investment banking transaction volume: About $90 billion - M&A transaction volume advised by Broadhaven. Broadhaven scale: About 75 people and 13 partners - Company size described by Sidgemore. iCapital Marketplace reach: Over 100,000 wealth managers and private bankers - Sidgemore describes the platform’s potential audience for fund discovery and allocation. Large GP wealth-channel allocation: About $250 billion of Blackstone’s roughly $1 trillion AUM - Example of a major alternative manager’s significant wealth-channel business. Mid-market U.S. private-market firms and GP stakes: About 1,800 firms with $500 million–$8 billion; roughly 3.5% have taken stakes - Sidgemore’s estimate of the potential GP-staking opportunity. Large-GP GP-stake adoption: About 30% - Sidgemore’s estimate for the share of the largest GPs that have taken stakes. Private-market AUM: About $15 trillion, versus less than $1 trillion in the early 2000s - Used to illustrate the asset class’s long-term expansion. Blackstone and BlackRock AUM: Blackstone over $1 trillion; BlackRock about $9 trillion - Scale comparisons used when discussing the potential growth of private markets. Emerging-manager fundraising outlook: 2022 and 2023 were challenging; 2024 was expected to remain challenging - Sidgemore attributes the outlook to LPs prioritizing existing manager relationships.

Pivotal Quotes: "iCapital is providing a core piece of infrastructure for this space." — Michael Sidgemore: His summary of iCapital’s role in making private-market investing more operationally accessible to wealth managers. "Now would actually, in my view, be a good time to allocate to venture, provided that you can find the right emerging managers." — Michael Sidgemore: His view that a difficult fundraising environment could create attractive opportunities, subject to strong manager selection. "The next five to 10 years will really be about private markets doing the same." — Michael Sidgemore: He compares expected private-market adoption with the expansion of ETFs and anticipates broader investor access.

Implications: Private-market growth will depend on scalable infrastructure, careful manager selection, and investor protections suited to less-liquid assets. Broader RIA and retirement-account access could expand capital flows substantially, strengthen asset-manager businesses, and prompt investors to rethink portfolio allocation.