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iCapital recently published its 2025 iCapital Global Advisor Survey. Typically, I don’t put much stock in these types of surveys. They usually boil down to something like: We asked our clients—who already invest in alternatives—if they’re planning to continue investing in alternatives. Surprise, surprise: most of them said yes. It’s marketing.
That said, iCapital is a behemoth, with a global reach that gives them access to professionals with reputations and insights worth paying attention to.
So here’s the slide that made my head explode:
If this is actually true, then we’re talking about a fundamental shift in how wealth portfolios are constructed—and a continuing flood of capital into a structure that, frankly, hasn’t earned the benefit of the doubt.
There are substantial marketing budgets committed to painting Evergreen funds as more liquid, lower-minimum, advisor-friendly wrappers for private markets. But behind the marketing spin and PR push—are all of the largest players in the industry—it’s a pretty standard Wall Street playbook that’s being run:
Institutions are pulling back from private market allocations, so now you and your clients are being targeted to fill the gap.
But don’t just take my word for it:
Evergreen funds present issues around valuations and fee conflicts: Alternative Credit Investor.
The Future Ain’t What It Used to Be for These Funds: WSJ.
Alternative Medicine?: Educational Alpha.
Private Equity’s Fundraising Demands Far Outstrip Supply: Institutional Investor.
Yale nears deal to sell $2.5 billion of private equity stakes, Bloomberg News reports: Reuters.
How Attractive Is Private Equity?: Morningstar.
Buyers Beware of the Toll-Laden Bridges to Private Markets: Investing in Financial History.
Is private equity becoming a money trap?: Financial Times.
Private equity founder warns retail investors risk being saddled with worst assets: Financial Times.
The Trump era has been a bust for private equity—that’s one reason PE is turning to retail: Fortune.
Moody’s: Semi-liquid funds introduce new risk to private markets: Citywire.
Buyout barons’ evergreen rush is risky money tree: Reuters.
Maybe we’re all wrong. Maybe I shouldn’t be losing sleep over a slide in a marketing deck. Maybe these funds aren’t structured to trap your clients into long-term vehicles designed to extract fees from them for a future of mediocre returns.
But if we’re right, and 77% of you are still going to put 10% or more of your client portfolios in Evergreen funds anyway, I want to make damn sure you know what you’re signing them up for.
Breathe, Dan. Breathe.
Best,
Dan
Alternative Talking Points
We review the latest monthly reports and industry analyses across the private markets, boiling them down into a few easily digestible points to share with your clients. Contact us if you’d like more depth.
Hedge Funds: May rebound driven by equity and event-driven gains, while crypto funds posted standout performance.
➕ Event-Driven strategies led hedge fund performance in May. The HFRI Event-Driven (Total) Index surged +3.8%, the strongest gain since December 2023, led by Special Situations (+6.0%) and Activist strategies (+4.35%).
➕ Equity Hedge strategies delivered their best month since late 2023. The HFRI Equity Hedge (Total) Index gained +3.7%, driven by strong showings in Technology (+6.0%), Fundamental Growth (+4.7%), and Quantitative Directional (+3.9%) sub-strategies.
➕ Cryptocurrency funds posted explosive returns. The HFR Cryptocurrency Index jumped +12.7%, while the newly launched HFR Cryptocurrency-Fundamental Index surged +24.7% in May.
➕ Long Volatility strategies fell back as market volatility subsided. After a strong April, the HFRI Long Volatility Index declined -2.5% in May, reflecting the market’s shift from defensive to directional positioning.
➕ Dispersion narrowed but remains meaningful. Top-decile hedge funds returned +10.6% in May, while the bottom decile lost -4.6%, bringing 12-month top/bottom dispersion to 56.4%.
Source: HFR
Private Equity: Mega-deals continue, but exits remain challenged and U.S. fundraising slows.
➕ The UK launched a new private capital sandbox. PISCES allows private companies to trade shares in periodic windows, supporting capital access and IPO preparation. Source: Walker Morris
➕ Mega-deals are still being done. Nine $1B+ deals were announced in May, led by Blackstone’s $11.9B acquisition of TXNM Energy and 3G Capital’s $11.3B purchase of Skechers. Source: S&P Global
➕ Tariff policy is creating valuation risk. Shifting tariffs are weighing on portfolio companies with global supply chains—especially in consumer and industrial sectors. Source: CBIZ
➕ Fundraising issue continues. And we quote. “For every $3 general partners seek, there’s only $1 dollar of potential allocations.” Source: Institutional Investor
➕ Despite Chime’s IPO. The IPO window is still mostly shut. Just eight U.S. PE-backed IPOs occurred in Q1, raising $4.3B—most underperformed post-listing. High-profile names like Klarna and StubHub have delayed their offerings. Source: Altaroc
Private Credit: Competition, credit quality, and capital flows are reshaping the opportunity set.
➕ Specialty finance is expanding—but with tradeoffs. As direct lending gets crowded, managers are pushing into receivables, royalties, and litigation finance. These strategies may offer cash-flow stability, but often come with longer lockups, structural complexity, and limited transparency. Source: Akin Gump
➕ Publicly traded BDCs are flashing caution. The Raymond James BDC Index is down nearly 7% YTD as of May 29—reflecting market concerns around earnings quality and potential credit deterioration in private loan portfolios. Source: Raymond James
➕ Increasing use of PIK features. While these structures can help borrowers weather tight conditions, they may inflate reported yields without delivering real income to investors. We’d view rising PIK use as a potential sign of borrower stress—not yield enhancement. Source: JD Supra
➕ Regulatory pressure is mounting. The IMF has called for increased oversight of private credit, especially around liquidity management and systemic risks. Source: Trowers
➕ Fundraising surged in Q1—but only in Europe. Global private credit fundraising jumped 60% to $59B, driven entirely by Europe’s record $31B. North America slowed for a second straight quarter. Source: Alternative Credit Investor
➕ Spread compression is real. In Q1, companies refinanced $7.3B in direct loans into broadly syndicated loans (BSL), saving an average of 263 bps. Private lenders are now cutting pricing—some as low as 4.5%—to stay competitive. Source: JD Supra
Commercial Real Estate: Sector divergence continues as capital reprices and investors sharpen focus
➕ Office distress is still mounting. Vacancy has reached 19.9% nationally, with distress surging in tech-heavy markets like San Francisco (28.6%), Austin (28.5%), and Seattle (27.5%). Remote work has become entrenched, and distressed asset sales are accelerating. Source: CRE Daily
➕ Data centers are attracting record capital. They accounted for 29% of sector-specific fundraising in Q1—up from just 5% last year. Surging demand from AI, cloud, and 5G continues to tighten vacancy and drive new development. Source: PERE
➕ Adaptive reuse is gaining traction. With office vacancies near 20% and a housing shortfall of 4.3 million units, investors are exploring conversions at scale. Proposed federal legislation could provide tax credits to support this shift. Source: NAIOP
➕ Cap rates continue to rise. Office cap rates are projected to reach 7.39% this year, reflecting higher financing costs and risk repricing. Retail has the highest cap rates across property types. Source: Statista
➕ Fundraising is rebounding. Private real estate funds raised $57.2B in Q1, a 76% increase from the same period last year. Blackstone closed $18.6B of that total across two funds. Source: PERE
➕ AI is quietly reshaping property operations. AI tools are increasingly used for tenant communication, maintenance, and pricing optimization—improving operational efficiency and investor visibility. Source: RIOO
Artificial Intelligence: Apple breaks the illusion of ‘Thinking Machines’ … Manus explains how they provide AI Agents with virtual computers.
➕ Hybrid AI deployment is emerging as best practice — A new look at enterprise AI finds most firms are pursuing hybrid models—balancing in‑house control with vendor speed. Advisors should evaluate whether their AI tools give them data control and customization or lock them into vendors. Source: Fintech.Global
➕ This one’s about privacy, not performance. OpenAI is fighting a court order that would force it to store all ChatGPT conversations indefinitely—a move they call a “privacy nightmare.” For advisors thinking about compliance, data handling, or just personal use, this is a reminder that LLMs log what you type, and regulatory pressure on that logging is heating up fast. Worth the read. Source: Ars Technica
➕ If you haven’t checked out Manus yet, you’re missing the boat—it’s a multi-agent system that gets actual work done by giving AI agents full virtual computers to operate like human researchers. It’s pretty wild to watch a Manus agent actually browse the internet, for example, but that’s just the tip of the iceberg. There’s a video and blog post. Don’t sleep:) Source: E2B.dev
➕ People seem overly shocked about Apple’s research paper showing that “reasoning” models like o1, Claude, and DeepSeek-R1 aren’t as smart as they seem. If you’ve spent any serious time using any of these models, you know exactly what they’re talking about. Is the industry doing a disservice to us all by using terms like “reasoning” with LLMs? We think probably. That doesn’t mean what they’re capable of isn’t amazing, though. Source: Apple Machine Learning Research
➕ RIAs are outpacing banks in AI adoption — According to F2 Strategy, 95% of RIAs now use AI (vs. ~24 % across wealth management), frequently for client communications, data analysis, and compliance. That’s a 4x adoption gap, and its implications for competitive positioning and client expectations are only increasing. Source: InvestmentNews
➕ Paper: AI in Financial Economics. Shumiao Ouyang and Hongwei Mo published a paper exploring how generative AI is transforming financial economics. They address how AI is fundamentally reshaping financial economics by enhancing prediction, information processing, and decision-making across various domains including corporate finance, asset pricing, and labor markets. While offering significant efficiency gains, it also introduces new risks and ethical challenges that demand careful oversight and further research. Source: SSRN
Worth your time
Our monthly recommendation of books, articles, research, and announcements we found interesting, important, or just plain entertaining enough to share. Sometimes, we’ll have a lot—other times, not so much. The objective is to share things that might be useful or interesting for your clients, not filler.
➕ Due Diligence 201: Why Some Evergreen Funds Charge You Fees on Borrowed Money: Third Wire Insights. We take another look at the fees charged to investors by Evergreen funds. They’re marketed as investor-friendly, but hear us out, then decide for yourself. Also, please let us know if you ever want a hand digging into the fees.
➕ Alternative Medicine?: Educational Alpha. William J. Kelly, CAIA pens another clever (and dead on) piece that uses medical metaphors to explore whether the current “democratization” of alternatives truly serves individual investors or just feeds the asset-gathering machine. I’m sure you can guess our opinion.
➕ Cliffwater and Ennis Don’t Agree on the Merits of Alternative Investments: Quelle Surprise!: Richard M. Ennis. Richard Ennis breaks down how benchmark selection can make or break performance analysis, showing a 150-basis-point annual difference between his and Cliffwater’s assessment of public pension fund value-added from alternatives.
➕ The Future Ain’t What It Used to Be for These Funds: WSJ. Thanks to Jason Zweig for shining a light. We bag on Evergreen funds a lot. We don’t believe most of them are designed with your client’s best interests in mind (Ignore what their marketing materials say. Read the prospectus). But look, don’t just take our word for it.
➕ Part 5: Turning AI into Real Products: Pure Math AI. The conclusion of a 5-part series from our friends at Pure Math AI. They documented the purchase and installation of their own NVIDIA T4 GPU to run inference in-house. They also explain a lot about why you might want to consider owning your own hardware, or, at the very least, ensuring you’re not locked into one AI vendor.
Disclosure:
This newsletter is for informational purposes only and does not constitute investment advice. All investments, including those in equity, debt, and alternative assets, carry certain risks, notably potential liquidity and transparency issues associated with many private investments. These risks should be considered in the context of an individual investor’s objectives and risk tolerance.
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