Episode summary
Rich Friedman on the Rise of Private Markets and AI Investing
Exchanges (Goldman Sachs)
· · 42 min · Hosts: Alison Mass · Guests: Rich Friedman
Summary
Rich Friedman argues that private equity has become far larger and more crowded than he ever expected, but he still thinks the model works. He says the industry is now “industrialized,” with thousands of firms competing, yet the opportunity remains in finding a few high-conviction, mid-sized deals and managing them well. In his view, the current challenge in private markets is not operating performance but exits, as slower public and strategic markets have made it harder to realize gains.
He also traces how Goldman Sachs built its merchant banking business over four decades, from early private financings and buyouts to credit, real estate, infrastructure, and overseas investing. Friedman says the business grew deliberately, with a strong emphasis on staying inside the firm, partnering with clients, and maintaining discipline. He highlights the importance of mentorship, patient expansion, and having the right leaders on the ground in places like China and Hong Kong.
On AI, Friedman sounds cautious rather than euphoric. He compares today’s momentum to past tech manias and says the firm should not chase every hot theme just because the market is excited. His view is that consistency, selectivity, and returns matter more than being early everywhere, even if that means missing some momentum trades.
Key takeaways
- Friedman says private equity still works, but the market has become “industrialized” and far more crowded than he ever imagined.
- He sees exits, not operating performance, as the main crisis in PE today, because public and strategic buyers are slowing.
- Goldman’s merchant banking platform grew by adding businesses deliberately over decades, not by rushing into every new trend.
- Friedman expects AI to create pressure to participate, but he prefers discipline over chasing momentum at the wrong price.
- He says the firm should aim for only five to seven investments a year and focus on high-conviction opportunities.
- In China, Friedman says the key was building trusted local leadership and relationships before scaling investment activity.
Notable quotes
“I never imagined the PE industry would evolve into what it is. This is industrialized. There are hundreds and hundreds of them”
“The crisis today in the PE industry is exits. It's not operating performance. Everything's slowed. Let's put it that way”
“it's okay to disagree. You can disagree. And you can disagree with force. But you can't be disagreeable”
“if you're not active in AI right now, you know, you're useless. So, it's sort of like, you know, you have to sort of balance that”
How the episode opens
I never imagined the PE industry would evolve into what it is. This is industrialized. There are hundreds and hundreds of them.
Thousands. Thousands. Thousands.
The crisis today in the PE industry is exits. It's not operating performance. Everything's slowed.
Let's put it that way. But it's an incredible business to be able to go search, find, and then manage and create. And the question is: is that still doable in the world?
And my answer would be, yeah. Welcome to Goldman Sachs Exchanges: Great Investors. Today, I sit down with Rich Friedman, the chairman of Goldman Sachs Asset Management, and one of the foremost leaders in alternative investing.
Well, welcome to Great Investors, Rich. It's so great to have you here. Thanks, Alison.
This is really a treat for me. So, today, I'm interviewing you for Great Investors podcast. But before we begin that and talk about the investment environment, I want to go back to your start at Goldman Sachs, which is 45 years ago.
Tell us about your first day. What was that like? Do you remember?
You know, I do remember. I remember we were at 55 Broad Street. Most people think we were at 85 Broad Street.
But, you know, I'm dating myself. But I think I was on the eighth floor. And it was a small area.
And there were about 25 to 30 people in the group. And the funny thing is, one of the people I saw as I was walking in was this guy named Joel Beckman. He was someone I grew up with in Riverdale.
It was a very low-key, very welcoming place. And I didn't feel, you know, so anxious walking in there because I knew someone. And it seemed like a place you could sort of, like, assimilate into.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private markets
- private equity
- ai investing
- merchant banking
- timing of ai payoff
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “Rich Friedman on the Rise of Private Markets and AI Investing” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Exchanges (Goldman Sachs), this episode and its artwork belong to Goldman Sachs. Octagon is not affiliated with the show; this page is an independent summary.
