Episode summary
Episode 34: Unlocking Value in Middle Market Private Equity with Guest Matt Katz, Fiduciary Trust...
Alternative Allocations
· · Hosts: Tony Davidow · Guests: Matt Katz
Summary
Matt Katz argued that middle market and lower middle market private equity remain the most attractive part of the asset class because there is more capital chasing too few large targets, while smaller companies still offer proprietary sourcing and lower entry multiples. He said these businesses often have clear operational gaps, especially in founder- or family-owned companies that lack professional management, giving sponsors a chance to create value through talent, sales, marketing, and M&A support.
He also said the exit market has improved from the post-2021 slowdown, but the larger end of the market is still constrained, which is why continuation vehicles, NAV loans, and dividend recaps have become more common. Beyond generalist buyouts, he highlighted sector specialist funds in healthcare, financial services, and aerospace and defense, where long-term demand and regulatory complexity can reward operators with deep networks.
On manager selection, Katz emphasized a disciplined due diligence framework centered on people, process, performance, and references. He said advisers should look for aligned incentives, unique sourcing, repeatable underwriting, above-median results, and verification through references from portfolio company management, LPs, GP peers, and former employees. He also described secondaries as a practical way to build exposure more quickly while reducing blind-pool risk.
Key takeaways
- Matt Katz prefers middle market and lower middle market private equity because competition is lower and operational upside is greater.
- Katz said the exit market is improving, but larger-cap exits remain muted, pushing sponsors toward continuation vehicles, NAV loans, and dividend recaps.
- He favors sector specialist funds in healthcare, financial services, and aerospace and defense for their secular growth and complexity.
- Katz’s diligence framework for advisers is people, process, performance, and references, with heavy emphasis on alignment and repeatability.
- He said secondaries can speed up portfolio construction, reduce blind-pool risk, and provide earlier distributions.
Notable quotes
“we think there's a structural capital availability and opportunity imbalance”
“in the middle market and even the lower middle market and you know there's various ways to define that”
“there's a lot of lowhanging operational fruit that you can do”
“We're looking at 20 25 years because if we're partnering with these groups we want to partner with them not for this fund that they're raising now but for fund three, four, five”
“Secondaries can be used in our mind as a tool in the toolbox within a private market's allocation”
How the episode opens
This is Alternative Allocations by Franklin Templeton, a monthly podcast where we share practical, relatable advice and discuss new investment ideas with leaders in the field. Please subscribe on Apple, Spotify, or wherever you get your podcast to make sure you don't miss an episode. Here is your host, Tony Davidau. Welcome to the latest episode of the Alternative Allocations podcast series. I'm thrilled to be joined today by Matt Katz from Fiduciary. Welcome, Matt.
Great to be here. Thanks for having me. — Let's start with the basics. Talk to us a little bit about your background. What drew you to the industry overall and your current role at Fiduciary?
Currently at Fiduciary, I'm a manager director and I lead our efforts on private markets, diligence, research, underwriting, portfolio management. I started my career right out of school. I was a finance major.
I knew I wanted to be in asset management like many folks. You know, I wasn't sure really what direction I wanted to head in. So, I got a role as a generalist research analyst at a consulting firm, investment consulting firm, underwriting and analyzing mutual funds for large institutional clients to invest.
And it was a great learning experience to really understand the industry, the people that are in it, but importantly, the different asset classes in which institutional investors invest, including private equity. As I started to get more ingrained in the space, I really started to gravitate towards the private markets. So this was 2008 postGFC era where you could really see an inflection point of the growth of the number of private companies in the US and relative to stagnant even dropping public companies.
And so I was really curious to sort of understand why that was the case. We had a small group of analysts that were focused specifically on private markets and private equity.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- middle market private equity
- private market due diligence
- private equity manager selection
- secondaries
- exit environment
Companies and tickers mentioned
- Fiduciary Trust International
- Segal Rogerscasey
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Alternative Allocations, this episode and its artwork belong to Franklin Templeton. Octagon is not affiliated with the show; this page is an independent summary.
