Episode summary
The Problem with Private Markets | Rational Reminder 402
The Rational Reminder Podcast
· · Hosts: Benjamin Felix, Ben Wilson · Guests: Larry Swedroe
Summary
Private markets were presented as a lower-volatility, higher-return alternative to public investing, but the episode argues that the appeal is often driven by valuation opacity, illiquidity, and fee structures rather than genuine economic superiority. The hosts say private equity, private credit, and private real estate can all look smoother on paper because their assets are not marked daily, even though the underlying risks may be just as large or larger than in public markets.
The discussion focuses on the current strain in 2026: private equity managers are struggling to exit holdings, private real estate funds are gating withdrawals, and private credit funds are also restricting redemptions as risky loans come under pressure. The hosts argue that this creates adverse selection, where retail investors may be invited in only after institutions and insiders have absorbed the best opportunities or sold down the harder-to-move assets.
They also push back on claims that private markets reliably outperform once fees and proper benchmarks are considered. The episode says the smoother returns can be misleading, continuation funds and evergreen structures add complexity, and recent markdowns at major funds and endowments suggest the risk was never as low as marketed. Larry Swedroe’s comments are acknowledged, but the core view remains skeptical.
Key takeaways
- The hosts argue that private market smoothness is largely a valuation artifact, not proof of lower economic risk.
- Private equity, private credit, and private real estate are all facing liquidity stress, with gating and forced sales becoming more common.
- The episode says retail investors may be the last buyers of hard-to-sell private assets, creating adverse selection.
- The hosts argue that net of fees and proper benchmarking, private equity outperformance is at best contentious.
- Larry Swedroe disagrees less on the facts than on the conclusion, but the episode says the burden of proof remains on private markets.
Notable quotes
“private market investing offers lower volatility and higher expected returns than what can be found in public markets”
“The volatility is still there. you just don't see it”
“private equities reported outperformance over public markets largely disappears once consistent benchmarks and definitions are applied”
“there's nothing special in private assets”
“Recent red flags in private equity, credit, and real estate have shown that these assets are at least as risky as their public counterparts”
How the episode opens
This is the Rational Reminder podcast, a weekly reality check on sensible investing and financial decision-making from three Canadians. We're hosted by me, Benjamin Felix, chief investment officer, Dan Bordalotti, portfolio manager, and Ben Wilson, head of M&A at PWL Capital.
Yeah, awesome. It's good to be back. This is episode 402 where we're talking about the talking about private markets or the problems with private markets which is a a pretty interesting topic and it has been a hot topic in news headlines recently.
Yeah, it's good to be back recording with you guys. We haven't recorded an episode like this in in quite a while. We had a a long string of of guest episodes. Uh so yeah, good to be good to be back.
Good to be here.
Yeah. Uh before we jump into the private markets content, I I did want to just address something. I've had a couple conversations recently where people had no idea what PWL does, which to us is a little bit concerning because we do expend a lot of energy creating content and and uh just putting ourselves in the public eye so that people know who we are and uh know to reach out to us if they're looking for the services that we provide.
Uh and so when people don't know what we do, it's kind of like, oh, we should we should probably make sure people know what it is that we do. In both of these cases, uh these people thought that PWL only does asset management and they'd kind of written us written us off as an option for what they were looking for, which was more of a a holistic wealth management type service uh because they thought we only did asset management.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private markets
- private equity
- private credit
- private real estate
- illiquidity and valuation opacity
Watch the episode
Watch “The Problem with Private Markets | Rational Reminder 402” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Rational Reminder Podcast, this episode and its artwork belong to Benjamin Felix, Cameron Passmore, and Dan Bortolotti. Octagon is not affiliated with the show; this page is an independent summary.
