Fund Banking Quarterly Update

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Welcome. And thank you for joining our quarterly series and the first of 2026. I'm Jeff Kaveney, the head of the Fund Banking Group at JP Morgan's Private Bank. Today I'm joined by Jake Manookian, who is the US Head of Investment Strategy for JP Morgan's Private Bank, and KK Rowland, who is the Global Head of Alternative Investments for Asset and Wealth Management.

As always, we're grateful for your continued partnership and for the time you're taking today away from what we know is a very full calendar. This series is designed specifically for our sponsors and fund clients to connect the dots between what's happening in public markets, private markets, and your day-to-day decisions around capital structure, liquidity, and growth. In today's conversation, we'll start with the macro and public markets backdrop and the implications of the recent oil shocks and geopolitics, as well as the ever-evolving Fed policy and rates that are shaping the outlook for risk assets in 2026.

From there, we're going to turn to private markets and alternatives, how LPs are using privates in this environment, fundraising trends and pacing, the rise of evergreen vehicles, and the state of liquidity, the growing role of continuation vehicles. We're really excited about the year ahead and look forward to sharing how we're thinking about these themes and what they may mean for you and your platform. So, to start, let's dive into the macro and start the conversation with Jake.

Over the last couple of months, we've had a lot thrown at us from the public markets-- renewed geopolitical risk in the Middle East, a sharp move higher in oil, then lower, then higher, then lower. A lot of debate about ongoing AI leadership in regulation, and then, obviously, the Fed, and where that's going, and potential new Fed Chair. So, for everybody on the line, all of this feeds into the potentials of exits and timing around valuations, and financing costs, and everything that they do from a day-to-day perspective.

So, just to get into the first question, how do you think about characterizing the overall macro and market backdrop as we sit and look at 2026? What does that mean for growth, inflation, and the key around risk appetite? And what are the really key variables that you're watching in today's market?

Yeah. First of all, thanks for having me. It's a pleasure to be here. I'm really excited to speak with this group. When we came into the year, we identified the three themes that we thought would be most important for investors, practitioners, private equity managers, et cetera to think about. And those three key themes were artificial intelligence, global fragmentation, and inflation.

And all of those issues, Jeff, that you led off with are very much tied to those three themes. So if you think about the most important things that have happened within markets this year, it's questions about the AI investment cycle and who might be most at risk from business model disruption and labor market disruption. With global fragmentation, the conflict in the Middle East right now fits squarely in that theme, which is kind of an umbrella statement that just evokes this idea that the global order that has existed for the last 30, or 50, or 80 years is changing, and thinking through what that means for asset prices, what that means for regions, what that means for strategic advantage from sovereigns and companies.

And then, finally, what you pointed out with the change in the Fed Chair and the oil price shock that we're going through today, how does that feed through to a Fed reaction function when you think about a backdrop where underlying inflation within the US was already at 3%, right? The reason we wanted to focus on themes is because, at least at the beginning of the year, there was a lot of consensus thinking around what the macroeconomic outlook looked like.

Which was-- what the consensus said?

What the consensus said was the economy should be better in 2026 than 2025. It's because we're putting a lot of the policy uncertainty around tariffs in the rearview mirror. We're going to get a pretty good fiscal stimulus from tax refunds from one big, beautiful bill, and we're going to get the Fed to cut one or two more times, which should ease financial conditions. And that was conspiring to create this kind of window of opportunity for capital markets to open up.

And, at certain points in this year, you had really elevated expectations for IPOs from some of the biggest private companies that we all know and love. So that dynamic has shifted in recent weeks just because we've been faced with some of those shocks. So think about those pillars, right?

Policy uncertainty going down. The war in Iran changes that. I think policy uncertainty is still elevated, and it's feeding through to financial markets. Stimulus from the one big beautiful bill-- we were thinking kind of $30 billion in excess tax refunds. That's been wiped away by the $0.50 increase in gasoline prices that we've seen so far. So if gasoline prices remain elevated, we're looking at a wash in terms of the tax refund conversation.

And then, finally, for the Fed, yeah, we might have said we're going to get one or two more cuts this year, but now that we have energy prices up 40% on a global benchmark, with an underlying inflation backdrop that's close to 3%, the case for easing just gets much harder. So, if anything, the outlook is a little bit more complicated. And there's much more dispersion within that consensus than when we came into the year.

So if I think about this year versus last year, everything that you just said feels like a repeat, but for a different reason, right? If you go into the first quarter of last year, we thought greater liquidity in the market. We thought Fed was going to ease more than potentially it did. And then you had liberation day. You had geopolitics. You had inflation concerns on tariffs.

And a lot of that just seemed to back back up into what are we going to get in '26. Similar view, now same view but different reasons and rationale, which is, obviously, this year, it's oil not tariffs. It's geopolitics, which kind of fed into last year. But do you think that that's still going to play out in the same way as it did last year, where it's more of a Fed pause than ease?

Yeah. That's an interesting way to think about it, is that we're kind of getting an eerie kind of replay of the market dynamic that happened last year. I think what's different is the equity market reaction is also the inverse, whereas I think you could argue that the equity market had a very pessimistic view of the tariff policy proposals that were coming out of the White House. And that's why you got kind of a 20% to 25% sell-off in a matter of weeks.

Now, I think you could argue that equity markets are kind of looking through the potential impact of the conflict in Iran, because they understand that there's potentially a threshold at which the White House is going to reverse the policy because it doesn't want to deal with the political cost of driving gasoline prices higher or driving the stock market lower. So the market's saying, why would we capitulate before there's a policy turn that is more market friendly on the geopolitical front? So you're not getting the same price response that you got last year, even if the underlying macroeconomic shock might be similar.

Yeah. I have two follow-ups on that, the first being we talked at one of our internal meetings around the differences in '26 versus '22.

Yes.

And so when you thought about the Ukraine-Russia conflict and the geopolitics to that, short term versus long term energy shock supply and demand, can you just talk about why this time might be a little bit different? Or is it the same? And then the follow-up to that is, is this short term dislocation and we're going to ease over the long term? Or do we see ongoing volatility around this. Because, as we know, when there's an energy crisis, that has all the impacts that you just talked about-- inflation, spending, planning, everything that we look forward to.

Yeah. This question is really complex. And just to refresh everyone's memory, if they didn't remember, 2022 was a pretty horrible year for public asset markets, both on the equity side and the long duration fixed income side. And it's because the Federal Reserve had to raise interest rates by 450 basis points from a starting place of 0.

And that was the highest hiking cycle since the '80s.

And fastest.

Fastest, highest since the Volcker era.

Yeah.

That hiking cycle happened because underlying inflation was already above 5% before we got an energy price shock. Now, the interesting thing about 2026 relative to 2022 is we're looking at three to four million barrels per day shut in because the Strait of Hormuz is, effectively, shut. When all was said and done with Russia, we lost one million barrels per day.

So the energy consequences could be larger this time around. It's just that the global economy is coming in from a place where they're a little bit more resilient, both in terms of diversification of energy supplies, because Europe has spent the last three years diversifying their energy supply chain, and the fact that there will be a response from, especially, the shale players in the United States to alleviate some of the most acute oil price shocks.

But the most important thing, I think, for investors to understand is the Federal Reserve is in a very different position. Where at the beginning of 2022, they were very behind the curve as it related to the inflation outlook, and then they got an energy price shock on top of that. I think, if anything, the academics at the Fed would argue that they're still in restrictive territory relative to underlying economic conditions.

They're getting an energy price shock, but their first step is going to be, we'll just stay on hold to make sure that this is temporary, instead of, oh, we might have to revert all the way to raising rates again.

OK. And is that another way to say that the Fed is going to continue to say that we're data dependent?

Yes. I think the baseline expectation we have is this gives the Fed all the reason they need to remain on hold. And we still expect an interest rate cut before the end of the year, but that's looking increasingly like a Q3, Q4 event rather than anytime soon.

Yeah.

OK. One of the greatest implications of all of this is going to be liquidity, and how our clients should be thinking about planning for exits, and what does that look like. That will dive into what we want to talk about with KK shortly around both liquidity, and then continuation vehicles, and some exits.

But, based on what you're seeing, how do you think that our clients, CFOs in particular, should be advising their portfolio companies around long term outlook, right? So just thinking about inflation and thinking about margin expansion or reduction based on what's going on in the overall economy. Obviously, different industries, so you can't answer industry specific, but how are you thinking about just, if I'm planning 12 to 24 months out so that I can give investors an LP's line of sight to where I'm going, what's the best case scenario? Or what do you think our clients should be looking for?

Yeah. I think the thesis that we laid out in our annual outlook, I think, still holds, which is that we're in a different inflationary regime than the one that existed before COVID. We're five to six years out from COVID. And inflation really hasn't normalized from reopening.

The Federal Reserve was already embarking on a rate cutting cycle when inflation hadn't even sniffed 2%, which is the target. We're kind of at core PCE of around 3% today. And we're just living through an environment where there's a lot of potential shocks that put upward pressure on inflation, whether it's geopolitical, whether it's supply chain security, whether it's capacity gaps in important sectors like housing or immigration.

And then I think the important part for CFOs to understand is that business and consumer psychology has shifted, right? In the post-GFC era, we were living through what we called secular stagnation, where businesses didn't think they could push price and consumers were very sensitive to price changes. Today, we were living in a world of 7% inflation in 2022. So 3% doesn't really feel that bad. So consumers are a little bit more attuned to a higher inflation environment. And businesses feel like they can push price a little bit more.

What is normal? We all lived in a zero for our whole adult life. So what is normal, historically speaking, when you talk about 7 to 3?

Yeah. It depends on the era, right? That's the thing about inflation. I think an average is a bad way to think about it on a long term historical basis. I think that does a disservice to understand the underlying dynamic. I think the Fed's target of 2% is probably the best way to frame it. Above 2% is probably a little bit hotter than we're used to. Below 2% is a little bit cooler than we would want.

3% for assets is fine, for consumers is fine. The only thing that I think really matters for markets, and valuations, and exits is if the Fed feels like they have to reengage, raise interest rates, drain liquidity from the system, impact financial conditions to get inflation under control. But I think their actions have spoken louder than words in suggesting that they're totally fine with a 3% inflation environment.

OK. So for our clients talking or advising their portfolio companies, we feel like there's still ability for folks to increase margin, increase pricing because it's not where it used to be. And short term memory says we feel pretty good about where inflation is today.

Yeah. And whether you look at the employment ratio, which is the number of prime age workers who are actually employed, it's the highest it's been since the early-2000s. When you look at wage growth rates, it's still printing above where it was in the GFC era. So it's not like consumers don't have the capacity to continue to spend. The other kind of wild card is potential releveraging, because they also have a lot of home equity that's built up from the kind of 2020, 2021 era that could add more firepower if mortgage or HELOC rates ever do come down.

Awesome. All right, my final question for you, but I'd love for you to get involved in the, KK, conversation as well, which is, with all the things that you just talked about in mind-- we have AI dynamics, we have oil, we have geopolitics, we have Fed policy-- are you still constructive on equity markets in 2026? And how are you thinking about the range for the S&P as a gauge to the overall market as we look toward the end of the year?

Yeah, I think there's a clear tug-of-war happening between some of the worries that people have around AI disruption to existing business models or, now, this kind of newfound worry about inflation. But when we look at the earnings backdrop, it's really robust.

We just printed another quarter of low teens earnings growth for the S&P 500. As much as people like to want to find a new trade besides the Magnificent Seven, they're still growing earnings at almost a 25% year-over-year pace. It's really tough to abandon a constructive equity view when corporate earnings look that strong.

As we're setting expectations for clients, we might not get another 17% or another 25% year like we had in '23, '24, and '25. But we still expect positive performance for equity markets. And I have plenty of thoughts about the potential exit and IPO calendar as well. So I'm happy to cede the floor to KK for now, but if it's OK, I'd love to jump in as well.

Yeah, absolutely.

Just because, from a macro perspective, it's something we're spending a lot of time thinking about.

No, that'd be great. So Jake just talked about the last three years of public market performance being really strong. But the return of volatility in the last two years has been very evident across the platform, across everything that you guys are doing. How do you think about investors and LPs using private markets today, and over the last, call it, 18 to 24 months, when they're thinking about public versus private allocation, when they're thinking about the shift in the role of how we've been using privates, which is more prevalent than ever?

And so how do you think about macro and micro, meaning industry specific?

And then what are your biggest concerns about those types of allocations?

Well, that was like six questions in one, so--

I know. I love to do that.

You're a compounder. So I would say the following. I wouldn't say privates, necessarily. I would say alternatives more broadly. And when you look at our client base, we put out a family office report that says the average allocation for the largest families. And the bigger the balance sheet, the higher the allocation tends to be, is somewhere around 46% allocation to alternatives.

And, within that, private equity typically funds at about 18%, followed by real estate, and so on. And we can go through all of that. And then if you look at the average across our client base, it's closer to about 22%. And if you look at a lot of the industry data for the traditional high net worth or the retail investor, when you look at a lot of the reports that are put out there, it's closer to 5%-- and expected to grow for a few different reasons.

But what I would say is a lot of our clients, when they think about getting protection to a lot of the things that Jake just talked about, the potential for higher inflation, they're thinking about things like infrastructure, or they're thinking about real assets, and they're thinking about some of the dislocations that took place over the last couple of years, like in real estate markets. But the question is, can that grow from here with the ability to also generate solid income?

So it really depends on what the funding sources for our clients and how to meet their goals using alternatives. But what I would say is they have certainly gone from what was optional, to essential, to achieving both long term return goals in a lot of places, but also stock bond correlation being so high the last several years has made everyone start thinking about hedge funds again. And 2020 actually, and then again in 2022, was the first couple of years that people started recognizing that hedge funds play a role in the portfolio.

And that was after 2014 to 2020, where there was this alpha winter in hedge funds where they needed base rates to be normal-- not high, but normal-- so that they get some alpha from their short rebate. They needed volatility to be present. And they needed a dispersion to come back. And those things went away for a long period of time.

And we had net negative inflows into that part of the portfolio for a period of seven years. And we continue to hit new records in terms of flows and allocations to that. Infrastructure is still, for the last three years in a row, I'm talking between $5 and $10 billion of annual flows every year for our clients. And that's when a total typical year for our clients is close to $40 billion in gross flows.

And so it's a significant part of clients' portfolios is using alternatives, using private markets to figure out how to protect against a lot of the shocks from a macro level that we see, and not just a fund-specific thing.

And to really draw out the point you made about stock bond correlation, the problem that a 60/40 portfolio has is that equities are a high return, but they're also high vol. And they have a kind of nebulous relationship with inflation-- sometimes good, sometimes bad. Fixed income has a lower volatility, which is great when you get a recession, but it's a negative correlation to inflation.

Yes.

And the hole that we're trying to fill in a lot of those client portfolios is all of the assets you just mentioned, which is, importantly, lower vol than equity, but positive correlation to inflation.

Yes.

So when you think about those three parts of the constellation of potential assets, I think that's the power of the alternatives portfolio that we have.

My next question was going to be portfolio construction, but you just walked through all of that.

Now, you get zero questions to ask.

Absolutely. So how do you think about this year? So how do you think about building out the pipeline? And what themes do you think are resonating with the investors that you're talking to and the managers that you're talking to in 2026? Because I think AI is always at the front of everything that we discuss and what managers discuss.

But what else is there? You talked about infrastructure. Is energy becoming a hot topic or something that folks are focusing on in the near term? How do you think about building out that pipeline. And, thematically, what do you think about 2026?

There's your six more questions again. OK, so we'll try to do this. I would say a lot of times when we are building our pipeline of opportunities, we present to our clients, we need to be thinking about investing over a three to five-year period. And so we had been looking at AI for many years. And in 2022, when we decided to invest behind AI, that theme, it was really allocating to the public market while some of the infrastructure layer, the models, all those things, were being built.

And we do see, now that the foundational layer is being built there, we are shifting more to the private market opportunity within AI. So I know that you said we don't need to talk too much about it, but I think it's important, because we're starting to see applications be built on top and people to think through. They used to think about software as a way to fix things, and now they're thinking about tokens, and intelligence, and how that's going to feed the engine. But the biggest constraint is still power and energy.

And so that was something that we started doing some research on the last several years. We've been investing for over 20 years in those spaces. And there's two fundamental shifts in energy that we like, which is that if you look, in 2016, there were over 70 managers, general partners, in the industry focused on it. Today, there's less than 10. And the whole business model has changed because now you have data, with the 200,000 wells in America that have been drilled, to actually figure out how to be cash flow positive day one versus year five to seven.

So we see that opportunity come to life. We put it in our pipeline of opportunities. But it still takes a while for our clients to understand, in places where you may have lost money 10 years ago when you allocated-- so the fund raise for a lot of those funds takes longer, even though it's a necessary in portfolios, in our opinion. The other sector themes that we're really focused on is industrials.

So there's a lot of sector specific industrial general partners that we're continuing to build the pipeline for this year and the next three years. And then an area that you might not have expected me to say, but I'm going to say sports. In the world of AI disruption and the need for premium content for a lot of the media ecosystem and everything else, we've been investing heavily in sports, both in teams as well as sports media and entertainment, the industry. And so those are things that, as we think about the equity side of the equation, we're still building out pretty heavily this year.

The last piece that I would say is defense. That is something that we've been talking about since Russia invaded Ukraine. But now, we're actually going to have some dedicated opportunities in there. And instead of picking one fund manager or a single fund, we're going to build these very select portfolios of three to four managers.

So what I say to every manager is figure out what you're the best at, what your competitive moat is, because even if you might have $100 million of capacity or $50 million of capacity in an idea, if we can build a portfolio that allows us the ability to offer a $200 billion concept to our clients, and they can get diversification across sector specialists in a theme like defense, all day, every day it's what we're doing. So I would say sports is a theme. Defense is a theme where we're going to build portfolios. And then the venture growth area in terms of how you actually access AI is the last.

And then on the other side of the equation, which a lot of clients use alternatives for the income side, finding ways to build the reimagined 40% that used to be fixed income, a lot of that is coming in inflation protection type things, like infrastructure. And then direct lending, as much as the headlines are out there about pressures on redemptions and everything else, the fundamentals still stay strong. We've skewed towards larger companies.

We really look at EBITDA of underlying businesses that we lend to above $50 million. But for a lot of those direct lenders, we still feel like it is, when you look at the last several years of flows, and even Q1 this year, we had net positive inflows into that. So the headlines can be a lot of things right now. And I think what we're recognizing is, as the alternative industry expands, you can have two truths.

You can have the ability to still make high single digit net returns in corporate direct lending while there's micro cycles of defaults that are starting to rise. And I think our clients are starting to figure that out too. So the ability for us to do direct lending but also add in opportunistic credit is something people are starting to look at.

Yeah. And I love the idea of the pod or the portfolio, sector specific, people doing what they have a moat around as their specialty. But if I look at it from an LP perspective, one of the challenges that has been a little bit more difficult in the last, call it, two to three years versus the preceding five is fundraising. And it is how are LPs thinking about-- are they re-upping? Are they going to brand new managers?

Where are you seeing fund flows from LPs putting money to work? Is it the best known managers that they already have track records with and they've already been in prior funds? Or are you seeing the thematic new defense having a little bit more allure from some of the LPs of late?

Yeah. I would say even some of those more specific thematic things, they're not first time funds. They might be on funds 4, 5, 6, or 7, and they've just decided to focus on an area. But what I would say is our re-ups in existing manager-- just because you had delivered in the past, our re-ups have almost gotten cut in half because the choices have increased. And the choice for the traditional retail investor, or ultra high net worth investor, is widening, because the growth of this client base is going to far exceed the institutional client base if you look over the next 10 years.

And if you think about the alternatives industry, it's a $21 trillion industry. If the retail investor or the individual investor is single digits of that today, I think it was Bain or Cambridge came out with a report that said just from growing from an average 3% allocation of alternatives and portfolio to 5% allocation for this ecosystem--

For the retail investor.

For the retail investor, over the next five years adds another $21 trillion of assets. That's the entire alternatives industry today in less than five years. So my point is that it's not that they're not going to back an existing investor, but the hurdle just becomes higher. It's not a given anymore.

And the ability for a lot of these managers to shift or the options that are available now in evergreen structures, the question is, do I need to lock up my capital for 12-plus years on something, or can I get the option for liquidity? We obviously make sure that clients understand, just because you put things in a potentially more liquid structure, the underlying assets don't become more liquid, but there's a lot more flexibility that it gives clients to rethink about how to redeploy capital.

And then the last thing that we didn't talk about yet, but in this shift from the institutional investor to an individual investor, tax aware alternatives is becoming a thing. It's not just that they want to invest in infrastructure. It's that there's a lot of uniqueness to these structures that can offset depreciation. And all of a sudden, you can convert some ordinary to return of capital. There's other things and reasons why so many individuals are attracted to alternatives in their portfolios.

Yeah. And you said one of the key words, which is "evergreen."

Yeah.

And so you run a massive platform, both evergreen and drawdown vehicles. When do you talk to a manager about, is an evergreen a good strategy? When should they be thinking about it? What's the right time to go from a traditional to an evergreen strategy from a manager perspective? And what advice do you give managers around maybe moving from the traditional drawdown structure?

Yeah. So two parts of the question. One is for us and our strategies, starting four years ago, we really converted a lot of the senior direct lending corporate lending into evergreen strategies instead of drawdowns because of how short the investment periods were. The fact that, by the time you got fully ramped, you were already becoming disinvested. It was hard to manage cash flows as an individual.

Private market evergreen funds and interval funds or tender offer funds solved a problem for the LP. That's always a good scenario when it can be a win-win, right? The manager gets to keep reinvesting. The investor gets to remain invested. And if their goal is to achieve a yield target, you're more likely to do that when you don't have to worry about when capital cash flows are going to come in and out. So in the income oriented, I would say, core, core-plus strategies, we actually prefer evergreen strategies versus drawdown.

Then there's the value add ecosystem and a lot of these strategies where it doesn't give you income, but it doesn't give you high enough returns, necessarily, to lock up your capital. And those strategies should consider evergreen if the manager has enough activity to feed the beast of inflows and manage those inflows and then has enough of a skill set to manage the liquidity side of the balance sheet. And those are conversations we have with CFOs and CEOs all the time of, do you have a strategy where you actually have great conviction in themes and ideas, you're short on capital, and we can optimize the structure?

So we're converting a lot of value add mandates, especially in things like real assets, into evergreen strategies. And we love to anchor portfolios. I think individuals are the new institutional investor when it comes to warehousing and anchoring.

And then the last piece is the more opportunistic strategies, whether that's in stressed or distressed credit, whether that's in more opportunistic equity. I would say we prefer drawdown. It would have to be a really big hurdle to move it into evergreen, because there's no first mover advantage in a lot of that.

So I would say to those folks that are great at being special assets, opportunistic, or have a more sector niche focus, I would say it might not be worth your time to consider an evergreen strategy--

Right.

--because I do think there's going to be a pendulum shift where everyone went straight to evergreen. And there's going to be this modulation to figure out, does it actually solve a problem for the LP versus just a GP wanting to figure out how to increase flows or increase fees associated with them?

Yeah. Well, let's talk about solving a problem for the LP, which is liquidity.

Yeah.

There's a ton of built up value in a lot of these portfolio companies. A lot of them have chosen not to go public for their own decision and reasoning. But it creates a little bit of an issue for some of our managers as they look at their portfolios and say, what am I going to do? Because I want to make sure that my LPs are getting money back, and they're having the ability to reinvest, and then that becomes the conversation about the continuation vehicle.

Yeah.

How do you guys look at a continuation vehicle-- positive, negative, neutral, circumstances dependent? Where do we think continuation vehicles go? Because three years ago, they were very niche and used seldomly. Now, they've had their day and, seemingly, every manager has a continuation vehicle.

Yeah. I would say-- and, sorry, on the last point on in evergreen. I will just also point out, because of knowing who our audience is, we've had now two years in a row where more than half of our flows have come in evergreen. And so that just gives a sense for what that demand is. If we're raising $35 or $40 million a year, that's a significant amount of money. And it's only just getting started.

Shifting that dialogue into the next piece of this conversation, which is providing the liquidity behind it-- again, a lot of times people do look at what's the alignment. Are you rolling your carried interest? Or how are you resetting economics? Who's coming in to reset that valuation?

We're actually entering in a period where you have continuation vehicles of continuation vehicles. And the big question is, are you really just not taking a hit on a valuation to just sell the company? Should that be the seed to an evergreen portfolio? There's all these questions that we want to help our GPs think through.

But the fact that now large, incredible firms in this private equity ecosystem are creating dedicated strategies of what they're calling GP solution funds tells you that we should probably rethink what these assets are, where they're held, and what the incentives are alongside these things. I could understand why it happened in the world of technology, because if you looked at the median AI company five years ago in 2020, the point in which they became decacorns, over $10 billion, it would be 0.7 years before they went public.

Now, it's 3.4 years where they're staying private, and they're over $10 billion of valuation. And so I think everyone's waiting for a lot of this IPO market to open up. But on continuation vehicles, I just say you need to figure out how to be incredibly aligned with the LP, answer every question about, from a valuation perspective, how you're valuing it, who's coming in. But you do need to have an end date on these things, otherwise you should figure out how to put it in the secondary market or figure out how to fund an evergreen vehicle, in my opinion.

Yeah.

Jake, you said you had some opinions.

You were excited about the IPO market.

IPOs, continuation vehicles.

From the macro high level view, the issuance markets have been dormant for four years, since the end of 2021. And the interesting thing is when you look at metrics of market liquidity, or I think a skeptic might say euphoria, 2021 was the biggest year for capital market activity, IPOs, first day returns of IPOs since the late-1990s.

Yeah.

So we definitely had a mini-boomlet.

Although part of that was direct listings and SPACs.

Totally. You have to count all that. But that was a lot of liquidity that flooded the market. 2025 was a little bit better. The average first day IPO return was 35%. In the late-1990s, it was close to 50%.

But when you look at the share of private equity deals, IPOs, secondary issuance, venture capital deals as a percentage of tech market cap, we're still really low--

Yes.

--relative to historical norms. So there's a lot of room for that to recover. And I think the best case outcome from a macroeconomic perspective would be to not have this kind of hot six-month window of opportunity where all of these big, important tech IPOs are happening at the same time and getting a lot of public market demand on day one.

I think that would be a sign of a little bit of euphoria and a little bit of end-to-late cycle behavior. And I think if we can have a more--

Paced and methodical.

Methodical issuance calendar, it just might be healthier for the overall outlook.

Although there's no way that's going to happen. Everyone's going to take a chance of an open window, I feel like. But I would say, well, the one--

But don't you think there's also a lot of companies? So Jake's talking about the top five.

That doesn't mean that they should all be public. But what I would say is, even in the last three to four months than in the last three to four years, those companies that have gotten to be so big, they are thinking about how to diversify so that once you-- I know there's a lot of venture capital funds that dial into this meeting too-- but the crossover investor, the managers that can allocate to both private and public markets and be strategically important to these companies when they go public is going to become even more important.

Yes.

And the retail, or high net worth, or ultra high net worth, whatever you want to call this ecosystem, is becoming much more important, because we know the venture capital community needs to drive some distributions paid in.

Everyone knows that's the worst kept secret. And so it will be interesting to see how people take advantage of the window, the big companies, how it creates liquidity, and where it feeds back into the system.

And we're watching the conflict in Iran. We're watching energy and oil prices. But we continue to believe that the number one factor that's going to drive risk asset performance, and especially equity market performance, is the continued AI theme. And this is a huge piece of the puzzle is seeing how the kind of issuance and issuance calendar goes.

And when we looked at the beginning of 2025, when you looked at the growth of the Mag Seven, it was obviously significant. But in the last 12 to 15 months--

They've underperformed.

They've not only underperformed, but now when you actually look at the AI indexes, the concern that everyone has is, are we at the peak of the market? So let's figure out how we can justify some of these things too.

I like that. I understanding both public markets, private markets, and then where we're going in each of those. Our goal is always to keep this under 45 minutes, so I'm going to do--

I feel like we could go for another two hours.

We could go for a long time.

We're doing well.

There's a ton of information that we want to get out to all of you. But, ultimately, I think that the idea is to get key themes and deliver those themes to you in a timely basis. And so when we think about the key themes that Jake touched on, whether that's AI, global fragmentation, inflation, all of those things are still the themes we're watching for in 2026.

We're still constructive on the equity markets. We still believe that the Fed, although maybe in a more data dependent, pushed out later to Q3 or Q4, has one to two cuts potentially this year. When we move into the privates, when we think about fundraising, we're still setting records fundraising. We're still having significant success in drawdown vehicles, even though evergreens have become a really big piece of that.

And I think one of the most interesting stats was around if the retail goes from 3% allocations to 5%, it's $21--

Over $20 trillion.

That's an incredible thing to think about as our clients are out fundraising, talking to potential LPs about where to go and what to look for.

And, sorry, I will also say, the fact that we've worked together for 20 years-- the most fun part of our job is figuring out the role of what our clients, the LP side with the GP side, and being able to co-create. So I know that some of these calls, you have to be pretty broad. We'd love to do follow-up meetings to figure out how do we solve a problem, but then provide a solution to our clients.

And a lot of the things that we've done over the last two years is because of our partnership to find GPs who are thinking about entering into retail, or thinking about warehousing an asset, or thinking about not wanting to do the continuation vehicle, but seeding in an evergreen-- that's the thing that I love most about these calls, is because we usually get a couple extra of those that come out of it.

Absolutely. That was a great way to wrap us up for today. Thank you, everybody, for joining. Please reach out with any questions. Look forward to seeing you next time.