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

Episode Summary

Executive Summary: iCapital, founded in 2013, has grown to $170B AUM by 2023, providing infrastructure for wealth channels to access private markets. Michael Sidgemore, former iCapital employee #8 and Broadhaven Ventures co-founder, discusses the rapid growth of RIAs, GP staking trends, and the evolution of private markets. He emphasizes the shift from wirehouses to independent advisors, the rise of GP staking for mid-sized asset managers, and the challenging but opportunistic environment for emerging venture managers. The conversation highlights private markets as the next wave of financial services growth, with potential for 401k and IRA assets to further fuel expansion.

Main Topics: iCapital's Growth and Role as Private Markets Infrastructure (Priority: 5/5): iCapital started in 2013, launched first product in 2014, and reached $170B AUM by end of 2023. It serves as the operating system connecting GPs (e.g., Blackstone, Apollo) with LPs (private banks, wealth managers), enabling lower minimum investments ($100K-$1M) compared to traditional $20M+ institutional minimums. RIA Channel Growth and Shift from Wirehouses (Priority: 4/5): The independent RIA channel is growing rapidly due to advisors seeking ownership and better client alignment. RIA assets grew 13%+ while wirehouses lost headcount (1.5-2%) and grew assets only 7.5%. Platforms like Focus, Hightower, Dynasty provide infrastructure for independence, including access to private markets via iCapital. GP Staking and Asset Manager Evolution (Priority: 4/5): GP staking involves selling a stake in an asset management firm to help with growth, recapitalization, or succession. Only 3.5% of mid-market firms ($500M-$8B AUM) have taken stakes, representing a large opportunity. Broadhaven is building a GP stakes fund with BTG Pactual, focusing on distribution and growth for mid-sized managers. Emerging Managers and Venture Capital Fundraising Challenges (Priority: 3/5): Emerging venture managers face a tough fundraising environment in 2024 due to LPs re-upping with existing relationships. However, this creates attractive vintages for those who succeed. Smaller fund sizes (under $50M) tend to outperform, and manager selection is critical. Broadhaven invests in emerging managers like Tiny VC, Boost VC, and Polychain. Private Markets Market Structure Evolution (Priority: 4/5): Private markets are undergoing electronification similar to equities, fixed income, and derivatives. iCapital and others provide pre- to post-investment infrastructure, making private markets more accessible and cost-effective. This evolution is driving growth and enabling wealth channels to participate. Future of Portfolio Construction: Private vs Public Markets (Priority: 3/5): Portfolio construction is shifting from an 'alternatives bucket' to a private vs public markets framework. Leaders like Apollo's Steph Drescher advocate for integrating private credit into fixed income and private equity into equity allocations. This reimagining, along with potential 401k and IRA inflows, could unlock trillions for private markets. Broadhaven Ventures Strategy and Investments (Priority: 2/5): Broadhaven Ventures invests in early-stage fintech, particularly enterprise financial services, leveraging Broadhaven's investment banking relationships. They also invest in 20 funds outside fintech for diversification (e.g., climate, consumer tech) and incubate businesses like Alt Goes Mainstream and a GP stakes fund.

Key Arguments: iCapital's infrastructure enables wealth channels to access private markets at lower minimums, serving as the connective tissue between GPs and LPs. The RIA channel is growing because advisors want independence and better client alignment, supported by platforms that provide back-end infrastructure and private market access. GP staking is a growing trend for mid-sized asset managers to gain distribution, growth capital, and succession planning, with only 3.5% of eligible firms having taken stakes. Emerging venture managers face a tough fundraising environment in 2024, but those who raise right-sized funds can generate strong returns; manager selection is key. Private markets are undergoing a market structure evolution similar to equities, with electronification and infrastructure enabling broader access. Portfolio construction will evolve to treat private and public markets as integrated, not separate, with potential for massive inflows from 401k and IRA assets. Broadhaven Ventures focuses on enterprise fintech, leveraging its investment banking network to help startups gain customers and navigate regulatory environments.

Data Points: iCapital AUM: $170 billion - By end of 2023, up from zero in 2013. RIA asset growth rate: 13%+ - Hybrid and independent RIAs grew faster than wirehouses (7.5%) and wirehouses lost headcount (1.5-2%). Blackstone AUM: $1 trillion - Of which $250 billion is from the wealth channel, built from zero in ~10 years. Apollo AUM: ~$700 billion - Close behind Blackstone in multi-strat platform growth. Broadhaven M&A transaction volume: $90 billion - Advised on deals like Franklin Templeton buying Lexington Partners ($1.75B) and Angelo Gordon sale to TPG ($3B). GP staking penetration in mid-market: 3.5% - Only about 60 out of 1,800 firms ($500M-$8B AUM) have taken stakes. Private markets total AUM: $15 trillion - Up from less than $1 trillion in early 2000s. BlackRock AUM: $9 trillion - For context, compared to Blackstone's $1T. Broadhaven Ventures investments: 122 investments, 15 exits - Including early investments in Carta and iCapital. Alt Goes Mainstream episodes: 85+ - Podcast started in early 2021, also includes newsletter (32 editions).

Pivotal Quotes: "iCapital really started 2013, launched our first product to the wealth channel in 2014 and has grown assets to over 170 billion by the end of 2023." — Michael Sidgemore: Describing iCapital's rapid growth and role as infrastructure for private markets. "I think private markets is really the next wave of growth in financial services." — Michael Sidgemore: Summarizing the overarching theme of the podcast and the future of the industry. "The independent channel has grown massively... advisor-managed assets at hybrid and independent RIAs grew like 13 plus percent." — Michael Sidgemore: Highlighting the shift from wirehouses to independent RIAs.

Implications: The podcast underscores a structural shift in wealth management and private markets. For listeners, it signals growing opportunities in infrastructure (iCapital), GP staking, and emerging manager investing. The potential for 401k/IRA inflows could dramatically expand the investor base for alts, reshaping portfolio construction. Advisors and asset managers must adapt to this evolution or risk being left behind.