The machine that powers private markets—the steady rhythm of companies being bought, built, and sold—is jammed.
By any measure, something has changed. The question is how serious it is.
Goldman Sachs has an answer—and it’s more candid than you might expect from a firm with billions at stake in the outcome.
But Goldman’s verdict stops well short of a crisis. And in a market where the prevailing press narrative has grown increasingly alarmed about private credit stress, the firm’s public positioning is notable—and worth scrutinizing.
To understand the current logjam, you have to go back to 2022.
Then the Fed raised rates by roughly 500 basis points, and “everything came to a halt.”
Nowhere is the tension between Goldman’s reassuring framing and the broader market reality more pronounced than in private credit.
Goldman acknowledged pockets of stress—particularly in software-centric companies and those over-levered coming out of the 2021–22 LBO boom—but drew a firm line at calling it a systemic credit crisis. The liquidity crunch in retail vehicles, Lyon argued, reflected investor misunderstanding rather than a flaw in the asset class itself.
“We’re in the middle of a market structure change,” Lyon said. “We have a situation here in alternatives where market structures are evolving very quickly.” At the same time, he made the distinction that historical averages in terms of defaults and underperformance make clear that we’re nowhere close to those averages. The retail liquidity squeeze, he argued, was “broadly an education point,” where investors simply hadn’t understood that illiquidity is the product, not a flaw in it.
“We are at a big inflection point right now,” Brandmeyer agreed, “and there is certainly a lot of stuff going on,” but the data show this is not a systemic issue.
Lurking beneath the distribution problem is a more fundamental challenge to the private equity value proposition.
For all its candor about current stress, Goldman is ultimately making a bull case—grounded in specific structural shifts.
Private markets are in a genuine structural reset. The hold periods, the distribution drought, the retail liquidity crunch—these are real and measurable. Goldman isn’t denying any of it.
Goldman argues that “gummed up” is not the same as “broken.” An asset class that survived the GFC, the 2020 pandemic shock, and the 2022 rate spike with loss rates well below public equity drawdowns has demonstrated real durability. And the structural forces driving capital into private markets—the migration of the innovation economy, the democratization of alternatives, the expansion of the secondary market—have long-term legs.
Whether you find that argument convincing likely depends on where you sit. For limited partners watching distributions dry up and default rates tick higher, the optimism may feel premature. For the GPs doing the work of building companies, it may feel earned.
Either way, the machine is straining. Goldman thinks it knows how to fix it. The next two years will tell us whether it’s right.
For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.
