Episode summary
Brian Moriarty and Jack Shannon: Putting Private Markets Funds Through Their Paces
The Long View
· · Hosts: Ben Johnson, Christine Benz, Amy Arnott · Guests: Brian Moriarty, Jack Shannon
Summary
Morningstar’s manager research team is applying its usual diligence framework to semi-liquid private market funds, with a particular focus on whether these products can really deliver the liquidity they promise. The guests argue that the core issue is not just access to private credit or private equity, but whether a fund’s assets, structure, and redemptions can coexist without forcing bad outcomes for investors. They stress that private markets data is harder to obtain, valuations are less transparent, and many of these products are younger than the public funds Morningstar has traditionally covered.
A major theme is the trade-off between liquidity and return. The guests say managers often need to hold more liquid assets or use leverage to support redemptions, which can reduce returns or increase risk. They also warn that leverage and infrequent valuation marks can make performance look smoother than it really is, especially in private equity and venture portfolios. For private credit, they highlight payment-in-kind income, nonaccruals, and interest coverage as more useful signals than standard deviation.
On fees, the guests say these products are often much more expensive than mutual funds or ETFs, with management fees, incentive fees, and borrowing costs all layered in. Morningstar is standardizing fee analysis to make comparisons more apples-to-apples. The medalist rating is meant to identify the rare semi-liquid funds the team believes can outperform a public-market equivalent after accounting for structure, cost, and liquidity risk.
Key takeaways
- The guests say semi-liquid private market funds should be judged on whether their liquidity promises match the liquidity of their underlying assets.
- They argue that leverage can boost returns in some private credit products, but it can also intensify losses and redemption stress.
- The guests say valuation practices in private equity and venture can create misleadingly smooth or even phantom returns.
- They view nonaccruals, payment-in-kind trends, and interest coverage as more informative than standard deviation for private credit risk.
- Morningstar’s medalist rating is intended to flag only the semi-liquid funds the team expects to beat a comparable public-market alternative.
Notable quotes
“the liquidity of the portfolio is of highest importance in our opinion”
“We know that outflows come for everybody”
“You have to generate it from somewhere else”
“there's this interesting dynamic where, like I said, all else equal. It's just a better mousetrap for leverage”
How the episode opens
Please stay tuned for important disclosure information at the conclusion of this episode.
Welcome to the long view. I'm Ben Johnson, head of client solutions with Morning Star. Today's guests are Morning Stars Brian Morardi and Jack Shannon.
Brian is a principal fixed income strategies for Morning Star. Before assuming his current role in 2015, Brian was a client solutions consultant for Morning Star office, a practice and portfolio management system for independent financial adviserss. Before joining Morning Star in 2013, he was a research assistant for Depal University's religious studies department.
Brian holds a bachelor's degree in political science from Michigan State University and a bachelor's degree in Islamic world studies from Depal University. Jack Shannon is a principal equity strategies for Morning Star. He focuses on actively managed equity strategies and is the lead analyst for MFS and Artisan Partners among other firms.
Before joining Morning Star in 2020, Jack worked in commercial banking and was a consultant providing subject matter expertise on complex financial litigation. Jack holds a bachelor's degree in economics and history from James Madison University. He also holds a master's of business administration in investments in corporate finance from the University of Notre Dame's Mendoza College of Business.
Brian Jack, welcome to the Long View.
Thank you. Happy to be here.
So, I want to start off our conversation at the very highest level. I think there are any number of our listeners that are unfamiliar or uninitiated with just the concept of private markets. So let's begin at the very most basic level.
Brian, I'll I'll ask you to help us understand what are we talking about when we're talking about private markets and investment opportunities in these markets and why are we talking about them? Why has this become such a popular topic for conversation in 2026?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private markets funds
- manager research process
- liquidity management
- valuation transparency
- public vs private markets risk
Companies and tickers mentioned
- Morningstar
- MFS
- Artisan Partners
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Long View, this episode and its artwork belong to Morningstar, Christine Benz - Director of Personal Finance and Retirement Planning, Ben Johnson - Head of Client Solutions, Amy Arnott - Portfolio Strategist. Octagon is not affiliated with the show; this page is an independent summary.
