The private market transformation with Sid Murdeshwar

Scott Semer (02:33): Hello. Welcome to another edition of the Torys podcast. Today we're delighted to be joined by Sid Murdeshwar. Sid is Managing Director with Alpinvest’s Co-Investment team and helps oversee the firm's investing efforts in North America. Sid has over two decades of private equity investing experience. Alpinvest is a private equity asset management business and a subsidiary of the Carlyle Group. As of 2025, Alpinvest has $85 billion of assets under management and invests in primary and secondary fund investments, direct co-investments as well as portfolio financing. Sid, thanks very much for joining. We're delighted to have you here.

We're going to talk about private markets versus public markets, which is pretty interesting, and sort of what the status of private markets is today. It's a pretty interesting time period. I kind of liken it to the difference between sort of social media and what people now refer to as legacy media, right? We grew up in an age of television and newspapers, and now the world is really changing. A lot of people get their information from much different sources.

You can see a similar growth in private markets, where as recently as 20 years ago, the public markets outnumbered private markets by a huge margin. And now you see private markets actually outnumber public markets. I'm curious to get your thoughts on, you know, a) why it is that we see this tremendous growth in private markets and whether, you know, there's a role for public markets going forward or whether private markets can do a lot of the things that we used to look to public markets to do better. Especially as we see developments in private markets, things like continuation vehicles. We see things like, you know, potential synergy among different portfolio companies of private markets. We see the ability to utilize leverage in creative and innovative ways, both to benefit portfolio companies and also to benefit investors who may be looking for a kind of tailored exposure. You know, you can get different kinds of exposure. You can get a loan with an equity piece. You can get different stacks of the credit table to see where, what levels of risk you have. There's a lot more customization in a sense. You can do both on the investor and the portfolio company side on private markets that just aren't possible in public markets. And so, all of that leads to this interesting situation we find us in today. And curious about your thoughts on a lot of that.

Sid Murdeshwar (08:46): Thanks, Scott. So, there are a lot of topics there. I'd say from the company perspective, you know, I think founders and business owners now realize that there's enough depth in the private markets that even a large company can stay private, and you can generate sizable realization events in the private market. So, gone are the days when taking a company public was the only way to generate significant liquidity and wealth creation. And as you've seen, the private equity industry scales up, you know, and they're now their private equity funds that are $100 million in size. And then there's others that are $20 billion. And so, with that kind of range, private markets can really cover a very broad range of companies.

From a management team perspective, I think there are many challenges to being public, including the costs of being public and then having to manage quarterly earnings expectations, which can lead to mismanagement of a business. And so, I think management teams are realizing now that there are benefits to staying private and that you can stay private. And especially for middle market companies, between $1 and $3 billion of enterprise value, companies of that scale tend to go public at times when stock markets are in the midst of bull runs, and then they may subsequently realize that being a middle market public company has its challenges, right? You're going to have limited analyst coverage, a limited float, which can then limit share price appreciation. And so, depending on the size of the company, I think there's more of a realization that there are benefits to staying in private markets, right? So that's all from the founder/business/owner/management team perspective.

Then from an investor perspective, not being invested in private markets means you have no exposure to a significant portion of the economy, right? If you look over time, the amount of public companies has shrunk and the amount of private companies has grown to the point where there's now substantially more private companies than there are public companies. And if you, as an investor, want exposure to the overall economy, you can't really get that from solely investing in public markets. And if you only have public market exposure, chances are you will be concentrated in larger companies, whereas you can oftentimes find more compelling growth opportunities and return opportunities in middle market companies, and private markets are a great way to access that portion of the economy.

Then you also mentioned liquidity and some of the innovation that's happened there. So, from an investor perspective, a big part of the attraction of private markets has been the democratization of these markets and the growth of private, wealth-oriented, evergreen products. And so, if you look back a decade ago, there were fairly limited options for private investors. And private markets in many ways were solely for institutional investors. Now, the private channel has really developed quite a bit. I think there's much more opportunity to tailor an investment strategy in private markets for private investors, right, so you don't just have to invest in a vanilla strategy if you want to create exposure that is bespoke and includes things like private credit, private equity, infrastructure, real estate, and even within all of those segments, you can specialize, right? You can choose to focus on middle market exposure versus large buyout. Within credit, you can target different portions of a capital structure, but you can really develop a tailored strategy within private markets.

In terms of liquidity for private markets, I think secondaries has been around for a long time, right, and secondaries are when you look to sell a portfolio of private equity assets. That's a fairly mature industry that's been around for some time, and that has been one of the options for generating liquidity. Continuation fund vehicles have become more common of late, and they've helped to fill some of the liquidity gap that we've seen more recently in private markets because exits have lagged expectations. That liquidity gap, I think, has been driven by more challenging IPO markets, you know, exit activity that's just generally been impacted by interest rates and various other factors that have just held back exit events. So, continuation fund transactions allow private equity investors to hold on to their best assets for longer and to continue creating value outside of the traditional private equity hold period.

I think continuation funds are likely here to stay, but to have a fully functional liquidity environment for private companies, I think we need to have all of the exit routes at our disposal, including being able to sell to other financial buyers and strategic buyers, and then also being able to take companies public. So, I think there has been innovation on the liquidity side, which is certainly helping as you think about private market investing. And then, going back to the evergreen point, you know, evergreen products do offer some liquidity. Typically, it's between 5% and 10% of NAV that's offered on a quarterly basis but, you know, there's at least now some sort of mechanism where investors can look to obtain liquidity if they are invested in one of these evergreen structures.

Scott Semer (08:59): Yeah, those are some interesting points. I guess, one, you know, related point to that, right, is the question of whether how reputation plays kind of a much more prominent role in the private markets than it does in the public markets?

Sid Murdeshwar (10:07): Yeah, look I think reputation is very important. And frankly, if you look at the most successful private equity managers and those that have successfully raised incremental pools of capital, a lot of it comes down to your track record and your reputation amongst your investors. And reputation is something that is easily damaged but then is hard to repair. And I think all private equity investors have that in mind, and it is something that we are aware of. Also, as you think about marketing for private equity firms, you know, we are trying to give investors the exposure that they want, right? And as we talked about with the development of private markets and the ability to pick different solutions, you really have to stick to your knitting and do what you say. So, if you market a fund as being focused on a certain market segment or certain sectors, you have to deliver on that. You have to deliver the performance, and investors have options. And if you don't perform, they can easily switch to other alternatives.

Scott Semer (11:39): Yeah, exactly. And here's, I guess, a somewhat off-the-wall question that kind of ties into that a little bit, which is, you know, one of the things you have in public markets, right, is they're kind of heavily regulated, and the idea is that that's sort of supposed to give investors kind of a way to make sure they're treated fairly and kind of get the same investment opportunities as insiders and management. In the private markets, right, we often see lengthy agreements. You know, there's a lengthy LPAs, side letters, all sorts of different legal documents. And you often get into these arguments—which I'm sure you're familiar with, right, both on the investor side if you're doing a secondary or when you're raising capital—where you get into arguments about different side letter provisions and all sorts of revisions. Ultimately, a lot of time comes down to, look, ultimately, at the end of the day, you have to kind of trust us, the sponsor and our reputation. The question always arises, well, why have legal documents at all then? If everything is ultimately just based on reputation, you know, you make the investment and either you get your money back and reinvest or you don't.

I'm curious, from your perspective, is there a value that maybe some of us that focus more on the legal side are missing to some of the legal documents from your perspective? Like does it help set the framework of this is kind of where we have to operate in? Curious if, you know, other than sort of preparing events in the unlikely event there's litigation, right, is there a value to all of these complicated legal documents that go into the private market space?

Sid Murdeshwar (14:00): Yeah. And so, look, there's different sets of legal documents that I think are relevant, right. So, fundamentally investors or LPs and private equity firms or GPs are aligned in that the private equity firm has to create value at the portfolio company-level. And as they create value and generate gains, investors benefit and the private equity firm benefits as well. Now, I think the legal documents are there, which is, I think, fairly common in all industries. The legal documents are there just to lay out frameworks and to prepare you for the “what if” scenarios, right? What if it takes longer to invest in a fund? Or what if there's a scenario where there's a partial liquidity event and how that will be managed? And it's much harder to deal with all of those issues on the fly, whereas it's much easier to address them as best you can upfront so that there's no misunderstanding in the future.

Now, as it relates to side letters and things like that, different private equity firms take different approaches. But there's some private equity firms that will disclose all the side letters that are in place with all of their investors. And, you know, each investor can make their own decision, right? They may say, look LP X, that is investing $500 million into a single fund, has been given certain concessions and am I okay with the concessions that investor is getting due to the amount of capital that they're investing? And, you know, there's some managers that perhaps won't disclose that explicitly, but it's usually something you can find out about and get detail about through discussion. So, I think, generally speaking, we're all aligned and then on the margin there are going to be certain side letter provisions that are given to certain LPs.

Now that's the LP-GP legal documents. The other side of it is purchase and sale agreements. And what happens between a buyer and a seller of a portfolio company. And I think that's where the voluminous documents are required because these are two independent third parties, and you're really trying to protect yourself in a transaction around what could go wrong and making sure that you're getting what you're paying for.

Scott Semer (14:40): There's one thing you mentioned there that's kind of interesting that I want to touch on a little bit, which is, you know, the side letters, as you said often, if you're a large investor, you'll get certain concessions, which is a big distinction, right, between private and public markets. The idea of public markets: if I invest my $50 I should get the same, you know, sort of protections from the legal regime as someone investing $300 million or $5 billion. Whereas private markets, it allows the sponsor to tailor specific provisions to different investors. Curious if you think that that is something that kind of has helped fuel the growth of private markets and what you think the advantages and disadvantages of that are?

Sid Murdeshwar (15:58): I don't think it necessarily fueled the growth. But at the same time, you know, when I say concessions, I'm referring to things like some private equity firms will give size-based discounts, right. So, if you invest above a certain amount into their fund, you may receive reduced management fees and carried interest terms. Or if you invest above a certain amount, you may receive more customized reporting than a smaller investor.

So, these types of concessions, I don't think they're atypical within the broader business universe. When you think about a manufacturing company that's purchasing commodities, to the extent they are buying more from a supplier, they're going to get preferential terms, right? So, I think the idea of scale matters is a universal one within the free market, within the business world. But, you know, I think it's a little nuanced within investing in that, you know, you can achieve some benefits, but it will be typically on the margin, versus what you don't see is concessions that allow a private equity firm to treat investors differently or to generate returns that are different for a larger investor versus a smaller investor on a gross basis.

Scott Semer (16:33): Well, to wrap it up a little bit, I guess I'm curious, a couple of points, to ask you about the future a little bit. You know, the biggest I think development in private markets has just been their tremendous growth over the last 10 to 20 years, and the development of more innovative solutions, such as credit funds, continuation vehicles, evergreen funds, as you mentioned, just a much greater variety of different types of offerings. Curious if you had to make a prediction, you know, what you think would be the kind of potential interesting developments over the next three to seven years?

Sid Murdeshwar (18:17): I think you're going to see continued specialization, right? Because the maturity and diversification of the private markets is something that surprised me. If you think back two decades ago, there were fewer private equity firms, and in many cases, value creation was dependent on utilizing a lot of leverage to create equity returns. And in the current state, I think private equity firms take a very sophisticated approach to value creation. No longer is it just about utilizing leverage to drive returns, but active management, bringing unique perspectives to the table, taking a hands-on approach to portfolio company management, those are all the norm. And the markets also developed significantly in that there's more sector specialization. There are firms that focus on specific market segments. There are firms that can specialize in certain value-creation methodologies. And as an investor, you know, you can really pick your exposure. So, I think that will continue to develop over time.

And then, as you think about go-forward innovation, I think one thing we'll see is that private equity managers will come up with new ways to meet the objectives of different investors, right? Whether that's customizing maturity profiles, liquidity profiles, access points, all of those things, I think you're going to see more options on the table. And now that we've seemingly broken down the barrier in the sense that these evergreen products are more common, and more private investors now have exposure to the private markets, I think you're going to see more rapid innovation and scaling. Whereas, it's probably been stymied over the last decade just because private market investing has been concentrated with institutions.

Scott Semer (18:53): Do you foresee a situation where so-called retail investors, smaller investors—you know, people who have, you know, they're not investing with a private bank, so they're not writing checks for, you know, the $5 million minimum or whatever it takes to go into a private equity fund—do you think there'll be more, you know, there are some sort of funds of funds that allow people to kind of aggregate and invest? Do you foresee that, where there's more of an opportunity for people who would traditionally be limited to investing in public markets have more of an opportunity to invest in private markets through certain interesting vehicles?

Sid Murdeshwar (19:47): Yeah, I think it's happened already. And frankly, the benefit has been that individual investors can gradually build up their private market exposure. So, folks that have no private market exposure and maybe hesitant to make a more substantial investment into private markets can very gradually come in at their own pace. They can maintain a liquidity option, but they can do it on a very gradual basis. So, I think you've seen that already. You know, if you compare the overall portfolio allocation of institutional investors to private markets, and you compare that to private investors, there's still a very substantial gap in place, right. And so private investors, individuals would have to scale up their private market exposure substantially to get close to where institutional investors are. So, I think you're going to see that continued evolution over time.

Scott Semer (19:56): We're just about out of time. I just want to ask one sort of final lighthearted question, I guess. First, I preface by asking, are you, you know, have you watched Shark Tank?

Sid Murdeshwar (19:58): I have, I have.

Scott Semer (20:47): So, one interesting observation then, sort of a question about that, right, is it's kind of emblematic of the fact that private markets have grown so much, right, is that now there's sort of a TV show that has made stars out of private equity people, right? Essentially, at least from the public perspective, it kind of operates like a private equity firm with these five or six different principals kind of deciding whether to make an investment. And so, you kind of know that the industry has really come of age when it's now treated to its own show. I'm curious about your thoughts on how realistic, obviously it's made for TV and designed to be entertaining, but I'm curious about your thoughts as to is there any kind of realistic element of that show in terms of just the way they evaluate companies and the way they advise people coming onto the show that you find interesting?

Sid Murdeshwar (22:15): Yeah, look, it's a great show, and I've watched it for many years. In many ways it is different from, I think, what a private equity firm does because, you know, one, you're making a decision in a really short amount of time without a lot of information. And I think that runs very contrary to what private equity firms do. You're going to have multi-month, perhaps multi-year diligence periods where you're getting to know a company and its management team and figuring out how you can manage that company and what you can do with that company. And then look, so much of Shark Tank comes down to the fact that you're on the show, right? And that there's marketing that comes with that and there's publicity that comes with that, whereas that's not really as relevant in the private equity landscape, right? We're buying companies or managing them, you know, outside the public eye. There's not a lot of publicity that comes with that. But you're just trying to make these companies better and, increase earnings and then you generate value. So, you just don't have that element of, you know, the eyeballs that come with the show and being able to do that. But, you know, I think it has driven a lot of interest in early stage investing. And, you know, I think it's interesting to watch. But if, if you're a private market investor and you're thinking about what they do on that show versus what you would get from a private equity manager, it's extremely different.

Scott Semer (22:54): The final question would be if you were starting out today and you just graduated from business school or, you know, a degree in economics, and you wanted to go into finance or you're not starting a company immediately, but you want to kind of learn everything you can—maybe you'll start a company 10 years from now, maybe you'll do something else—the traditional role would have been, you know, you go to Goldman Sachs, you go to a bank, and you work 100 hours a week, and you'll pick up knowledge along the way, and then eventually that'll open opportunities. What do you think you would do today if you're just starting out? Go to a private equity firm or still try to take the traditional bank route to get as much information as you could?

Sid Murdeshwar (23:53): I think the traditional bank route is still a good one and still gives you a pretty broad base of experience to build off. I think you're seeing increasingly private equity firms, especially the larger ones that can develop training programs, hire directly from college. So, if you can find opportunities like that, I think that's certainly interesting.

And joining private companies right away, if your goal is to eventually start your own business or build your own business, starting off as an operator is also another interesting way to do it, right? Because then you're developing the real world, hands-on operating experience, and you can supplement it with the financial experience that you might get at a bank. You know, you can also engage advisors to help you with that piece, but developing the operating experience is also really valuable. So, I think there's a lot of ways to try to get to that end goal.

Scott Semer (24:20): Well, we really appreciate you coming on. It's sort of a fascinating time period with the development of AI and a lot of obviously political changes. You know, private equity and private markets are really kind of at the cusp of everything that's interesting, that's happening in the business world. And so, it's going to be fascinating to see what develops. And Alpinvest is right there doing just amazing and interesting things and really appreciate you taking the time to visit with us.

Sid Murdeshwar (24:24): Thanks, Scott, I appreciate it, and thanks for letting me participate.