Private Markets Transition From Niche To Core Portfolio Component

Masters in Business · January 02, 2026 · Listen to Original Episode →

Original Title:

TL;DR

Private markets are transitioning from niche alternatives to core portfolio components, offering enhanced diversification and return potential beyond traditional public equities and bonds.
The shrinking universe of public companies, with 90% of global businesses being private, necessitates private market exposure for representative portfolio diversification.
Apollo's commitment to co-investing alongside clients on its balance sheet guarantees a shared outcome, fostering trust and aligning firm interests with investor success.
The wealth channel for private markets requires significant investment in relationships, product breadth, education, and technology, with Apollo investing $1 billion in wealth tech.
Innovations like interval funds and ETF structures are simplifying access to private markets, moving the ecosystem from analog to digital for broader adoption.
A fundamental rethink in private markets positions them not as high-risk, but as flexible tools for retirement planning and wealth building, challenging historical perceptions.
Global trends toward democratizing private markets, driven by regulatory changes and the need for better retirement outcomes, indicate substantial future growth for individual investors.

Deep Dive

The private markets are undergoing a fundamental transformation, shifting from a niche asset class to a core component of diversified investment portfolios for both institutions and individuals. This evolution is driven by a growing recognition that liquidity in public markets does not equate to safety, as evidenced by recent periods of public market volatility and concentration. Consequently, investors are increasingly seeking the potential for excess returns and diversification offered by private equity, private credit, and other alternative strategies, necessitating new structures and approaches to make these investments more accessible and integrated into wealth management.

The traditional view of private markets as inherently risky and illiquid is being replaced by a more nuanced understanding. Stephanie Drescher, Apollo's Chief Client and Product Development Officer, highlights that the public markets themselves can exhibit significant risk due to concentration, as seen in the outsized performance of a few stocks within indices like the S&P 500. This realization prompts a reevaluation of portfolio construction, where private market solutions are now considered integral to both equity and fixed income allocations, not merely an add-on. The shrinking universe of publicly traded companies further bolsters the case for private markets, which represent the vast majority of global companies. Drescher emphasizes that the ability to create proprietary investment opportunities through dedicated origination engines is a key differentiator for firms like Apollo, allowing them to deliver alpha by sourcing unique deals across a broad spectrum of sectors, from fleet finance to consumer and specialty finance.

The expansion of private markets into the wealth channel presents both opportunities and challenges. Apollo has made a significant strategic commitment to this segment, investing heavily in wealth technology and developing a comprehensive suite of products and partnerships to serve financial intermediaries, including private banks, RIAs, and independent broker-dealers. The firm's commitment to co-investing alongside clients, often with substantial allocations from its own balance sheet, serves as a powerful confidence driver, signaling a shared outcome and alignment of interests. However, the operational complexities of private markets, such as subscription processes and reporting, differ from the more standardized public markets. To address this, innovations like interval funds and ETF structures are emerging, aiming to simplify access and integrate private market exposure more seamlessly into advisor platforms. Drescher anticipates a future where private markets are more readily accessible through holistic solutions and diverse capital pools, enabling individuals to adequately plan for retirement with investments that offer enhanced return potential and better align with long-term time horizons, moving beyond a sole focus on minimizing fees to maximizing outcomes.

Action Items

Audit private market access: For 3-5 intermediary channels (private banks, RIAs, family offices), assess current product structures and identify opportunities for more liquid or semi-liquid offerings.
Develop client education framework: Create 3-5 core modules explaining the role of private markets in diversified portfolios, focusing on risk-return profiles and liquidity considerations.
Measure private market allocation gap: For 3-5 client segments (e.g., high net worth, institutional), calculate the difference between current private market allocation and industry benchmarks (e.g., 20% institutional average).
Track proprietary origination engines: For each of the 16 proprietary origination engines, establish key performance indicators to measure their contribution to alpha generation and client outcomes.
Evaluate wealth tech investments: For the $1 billion invested in wealth tech, define 3-5 metrics to assess the impact on intermediary efficiency and client access to private markets.

Key Quotes

"I did always have finance in my sights so undergrad it was econ and psych I I joke that I use the psych in my day to day field way more than the econ these days but there there was always a draw towards doing something in in the financial kind of arena interest in markets and the like so very early internships led me down that path."

Stephanie Drescher explains that her early academic interests in economics and psychology, coupled with internships, guided her toward a career in finance. She humorously notes that her psychology background proves more practically useful in her daily work than her economics studies.

"So my father's mother uh lived with us for a time and believe it or not uh she was born in the very very late 1800s and while her brother went on to become a doctor she capped out at an eighth grade education and so the power of education was always um a core value and a focus of hers and my family um and she used to read the wall street journal cover to cover every day super smart uh loved tracking stocks and so we started to track stocks together."

Stephanie Drescher shares a personal anecdote about her grandmother, highlighting the profound value her family placed on education, even in the face of limited formal schooling. Her grandmother's daily engagement with the Wall Street Journal and her interest in tracking stocks sparked an early fascination with financial markets in Drescher.

"So I started with a rotational opportunity which uh was terrific I had everything from fixed income research to private banking in geneva uh did you go to switzerland I did yeah for about six months uh I realized that I needed to buy all my groceries during the day because it was closed by the time I got out of work and then I liked to travel on weekends so uh importantly though and seriously it was a terrific uh time in my life to be more aware of time zones and cultural nuances and really see kind of a client perspective outside of of new york and the us."

Stephanie Drescher describes her early career experience at JP Morgan, which included a rotational program that provided exposure to various financial areas, including international private banking in Geneva. This international experience, she explains, was crucial for developing an awareness of global time zones, cultural differences, and client perspectives beyond the U.S.

"So alternatives way back then but before you leave switzerland um I recall a vacation and too long ago to lake geneva and what's amazing and we were in this hotel that used to be a castle and like you think you have some understanding of the gilded age and old money and then you see no no we mean 500 years of money it's just such a different eye opening so different than here yeah yeah really really amazing."

Stephanie Drescher reflects on her time in Switzerland, contrasting the concept of "old money" with the historical depth she encountered there. She found the experience eye-opening and distinctly different from what she had previously understood about generational wealth.

"So you know the the wealth business uh i saw certainly in my very early days of jp morgan but then for my first kind of 16 plus years at apollo uh the private bank or wire was really more the exception than the rule it was uh a more of a uh episodic type of relationship that all completely transformed into a strategic commitment from uh from all of us at at apollo starting about four or five years ago."

Stephanie Drescher explains the evolution of Apollo's wealth management business, noting that initially, private banking relationships were infrequent. She highlights that approximately four to five years prior to the interview, this shifted to a significant, strategic commitment from the firm to its wealth division.

"So on on the origination side it is quite broad think everything from fleet finance to fleet jets ships all the above and and even trucking you know there's a whole range in terms of everything from aviation to kind of ground transport there's consumer finance there's specialty finance that's there's mortgages so it's it's quite broad in terms of the reach but it's ultimately originating the investment in what we call kind of the industrial renaissance and the need for that private capital is is real and additive to to what could otherwise be found in the public markets."

Stephanie Drescher details the broad scope of Apollo's proprietary origination engines, which span diverse sectors such as fleet finance, aviation, ground transport, consumer finance, specialty finance, and mortgages. She emphasizes that these engines are designed to create proprietary investment opportunities within what she terms the "industrial renaissance," providing capital that complements public market offerings.

Resources

External Resources

Books

"Such Good People" by Amy Bloomfield - Mentioned as a current read.
Works of Emerson and Thoreau - Mentioned as inspirational reading related to nature.

Articles & Papers

"The Health Span Study" (Harvard) - Discussed for its research on genetics, longevity, and health.

People

Stephanie Drescher - Chief Client and Product Development Officer at Apollo.
Barry Ritholtz - Host of Masters in Business.
Mark Rowan - CEO of Apollo.
Mary Erdos - Mentioned as a mentor from JP Morgan.
Dr. David Sinclair - Affiliated with Harvard, researcher on longevity, genetics, and health span.
Emerson - Mentioned for his works on nature.
Thoreau - Mentioned for his works on nature.
Amy Bloomfield - Friend from college and author of "Such Good People."

Organizations & Institutions

Apollo - Private investment giant overseeing client assets.
JP Morgan - Mentioned for its private banking and alternatives division.
Columbia Business School - Institution where Stephanie Drescher obtained her MBA.
Barnard College - Institution where Stephanie Drescher obtained her bachelor's degree.
Barron's - Mentioned for its "Women in Finance" list.
State Street - Partnered with Apollo on ETF structures for private markets.
UBS - Mentioned as an example of a private bank and wire.
Morgan Stanley - Mentioned as an example of a private bank and wire.
Harvard - Institution affiliated with Dr. David Sinclair.

Websites & Online Resources

Adobe.com/dothatwithacrobat - Website for Adobe Acrobat Studio.
Bloomberg.com/nokia - Website for information on the "Exponential Era" series.
Odoo.com - Website for Odoo business software.
Mintmobile.com - Website for Mint Mobile wireless service.

Other Resources

Private Equity - Discussed as a private market strategy.
Private Debt - Discussed as a private market strategy.
Private Credit - Discussed as a private market strategy.
Private Infrastructure - Discussed as a private market strategy.
Hedge Funds - Discussed as a private market strategy.
Alternatives - Discussed as an investment category.
Core and Satellite - Investment strategy concept.
Value Investing - Investment strategy discussed in relation to market changes.
Toxic Assets - Concept discussed in relation to pricing.
Purchase Price Matters - Internal and external tagline at Apollo.
One Apollo - Concept referring to the integrated offerings of Apollo.
Wealth Tech - Investments made by Apollo in technology for the wealth sector.
Interval Fund Structure - Structure allowing easier access to private markets for advisors.
ETF Structures - Structures that can include private markets.
Private Markets - Broad category of investments.
60/40 Portfolio - Traditional investment portfolio allocation.
Illiquidity Premium - Benefit of investing in illiquid markets.
Alpha - Excess return generated by an investment.
Semi-liquid Products - Investment products offering some liquidity.
Two Year Credit Notes - Example of a more liquid private market instrument.
Investment Grade Credit - Type of credit investment.
ETFs - Exchange-Traded Funds.
Proprietary Origination Engines - Systems built by Apollo to create investment opportunities.
Industrial Renaissance - Concept related to the need for private capital.
Fleet Finance - Example of a proprietary origination engine area.
Aviation - Example of a proprietary origination engine area.
Ground Transport - Example of a proprietary origination engine area.
Consumer Finance - Example of a proprietary origination engine area.
Specialty Finance - Example of a proprietary origination engine area.
Mortgages - Example of a proprietary origination engine area.
Democratization of Private Markets - Global trend of increasing access to private markets.
401k - Retirement savings plan.
LTF 2.0 - European regulation related to retirement plans.
Managed Accounts - Investment accounts.
Target Date Access - Investment approach for retirement planning.
High Performance Culture - Culture focused on achieving strong results.
Meritocracy - System where advancement is based on ability or achievement.
Entrepreneurial Spirit - Mindset of innovation and risk-taking.
Winning Culture - Culture focused on success and achievement.
"We not Me" - Philosophy emphasizing teamwork.
Longevity Study - Research on extending lifespan and health span.
AI (Artificial Intelligence) - Technology discussed in relation to the internet and business.
Identity - Concept discussed in relation to AI agents and trust.
Okta - Company providing identity security for AI agents.
Adobe Acrobat Studio - Software for PDF management with AI features.
Bloomberg Audio Studios - Producer of the Masters in Business podcast.
Bloomberg Radio - Radio network broadcasting Masters in Business.
Bloomberg News Now - On-demand news report service.
Masters in Business - Podcast hosted by Barry Ritholtz.
How Not to Invest - Book by Barry Ritholtz.