šļø Sunday Digest: Private Markets Insights 8/2
This week: PE's strange bedfellow, shaky multifamily loans, and PE returns forecast from Vanguard
Happy Sunday! Hope you are enjoying your summer - I, for one, am shocked itās already August.
Today, weāll cover three things:
The surprising link between crypto and private equity.
How widespread is distress in multifamily loans right now?
Vanguardās bold returns forecast from its private equity report.
Before we dive in:
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š Whatās Better than Private Equity? Private Equity + Crypto in Your 401(k)!!
Private equity firms have long salivated over the $9 trillion parked in Americaās 401(k)s, and under Trump, they might finally get their wish.
But in a plot twist, the administration is reportedly eyeing a more āexpansiveā executive order that would open the door not just to private funds, but to crypto too, reports the WSJ.
Some PE firms are privately worried that crypto could be a distraction. Theyāve spent years trying to position private equity as a sophisticated, institutional-grade upgrade to the typical retirement portfolio, not a meme-fueled gamble.
But in the end, what better way to diversify your high-fee, illiquid private 401(k) holdings than by adding a zero-fee, highly volatile asset class to the mix? (Iām being facetious, in case you are wondering).
š¢ Commercial Real Estate
Iām breaking my own rule here (note to self: donāt quote stuff from X, Leyla), but I promise thereās a good excuse reason.
This stat bomb comes courtesy of Lonnie Hendry, Chief Product Officer at Trepp. If youāre not already listening to their podcast, you are missing out. (No, this isnāt sponsoredābut hey, my DMs are open š ).
Some eye-popping numbers for loans with a DSCR below 1.0x (which simply means the property isnāt generating enough cash flow to cover its debt payments):
Houston MSA: $5.5 billion worth of multifamily loans
DFW: $7.2 billion
San Antonio: $2.0 billion
Curious how this all began (yes, including busloads of California dentists syndicating Texas multifamily)? - read this story:
You doing the math? Thatās nearly $15 billion in potentially distressed multifamily debt across just three Texas markets. And yes, some of those loans have rate caps (an insurance product that covers interest payments if interest rate on the loan exceeds a certain threshold), but rate caps are not forever.
This is blood all right, just not in the streets yet. The $15 billion dollar question is how long the lenders are going to be willing to extend these loans? š¬Would love to hear what you are seeing - comments are open!
This is a deeper dive, for those curious:
Private Equity Outlook
Iām not exactly subtle about my skepticism when it comes to Vanguard dipping its toes into private markets. Whether illiquid, opaque investments belong in a 401(k) is definitely debatable, but personally, Iām not sold. That said, Iām all for free markets: if consumers want it, they should get it.
Alright, stepping off my soapbox. What I really want to draw your attention to is Vanguardās freshly released report on private equity. (You know how it goes: when youāve got something to sell, a report usually follows). Some highlights:
After a recent slowdown, private equity exit markets are bouncing back in 2025, giving investors better liquidity options (good for investors, but keep in mind a lot of this liquidity is from secondary transactions)
Vanguard forecasts long-term private equity returns to outpace public equity markets by about 3.5% annually (this is the selling point).
Dry powder reserves remain high: expect more deal-making activity and increased competition for quality assets.
Institutional and sophisticated private investors are placing greater emphasis on manager selection, operational improvements, and value creation levers to drive alpha in the current environment. This echoes the recently published McKinsey report - I talked about it here:
The report highlights the importance of liquidity management and alignment with personal investment horizons, especially for those considering new or increased allocations to private equity in 2025. This is an excellent reminder. Thank you, Vanguard research (or was it legal?) team!
Thank you for reading!
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-Leyla
P.S. Can handle more of me? Iām on X and LinkedIn
P.P.S. While not my primary focus, I provide consulting services to both GPs and LPs. You can email me at leyla@accreditedinsight.com