Private markets need more scrutiny than the sales pitch suggests

Private markets may be the industry’s favourite story right now, but Tim Murphy’s message is that advisers should be careful not to confuse popularity with clarity.

Fund flows have surged with institutional-style strategies are being repackaged for wealth clients and evergreen structures are proliferating. Yet beneath that growth, Murphy observes the market and demands far deeper due diligence than many advisers usually apply.

His central point is not that private markets should be avoided, but that the products now being sold into wealth are often far more complex than the marketing implies, and that complexity can obscure meaningful risks.

Private markets are not one simple category

Murphy’s first argument is that private market products are often discussed too loosely. The language of democratisation makes for a compelling pitch, but it can also flatten important differences between structures, jurisdictions and investment vehicles.

Advisers increasingly hear that they can now access the same types of opportunities institutions have used for years. Murphy does not reject that idea outright, but he does question what exactly is being brought to market, and on whose terms.

His warning is pointed. Allocators need to make sure they are not simply being sold the less attractive by-products of a private markets boom. All the while the cleaner or better-aligned structures remain with large institutional investors.

In Murphy’s framing, that means understanding whether a product has been genuinely built for end investors, or whether it is primarily designed to create sticky assets and recurring revenue streams for the manager.

That concern becomes especially relevant in the current wave of evergreen funds. These structures may solve some accessibility issues for wealth clients, but Murphy argues they also introduce a fresh set of complications around liquidity, valuation, incentives and governance.

For advisers, private markets are no longer a broad asset class decision. Each product must be examined with much greater precision.

Closed-end track records do not automatically translate

A major theme in Murphy’s remarks is clear. Too many products are sold using old credentials. These credentials fail to map neatly onto the structure now being offered. A closed-end institutional private equity fund with ten-year locked capital is different. It is not the same thing as an open-ended evergreen trust offered to Australian wealth clients. The return characteristics, liquidity mechanics and operational demands are fundamentally different.

That distinction matters because many managers promoting evergreen products are leaning heavily on historic internal rates of return generated in very different conditions.

Murphy’s point is not that those track records are meaningless, but that they are not directly comparable to time-weighted outcomes in an open-ended structure. Advisers therefore need to be cautious about assuming that past performance in one format will carry over cleanly into another. He also makes the broader observation that even the largest private markets firms are still adapting to this wave of demand.

In Murphy’s assessment, some of the biggest global managers are racing to build compliance, legal and operational infrastructure. They require this to support evergreen products at scale. Their investment teams bring high levels of experience. But they still have limited experience managing these structures in an open-ended environment. That is an uncomfortable but important distinction.

“These products are infinitely more complex than most of what we’re used to.”

The real risks often sit in the structure

Murphy’s third and most practical argument is that the investment capability of a manager may not be the biggest issue. In many cases, the structure wrapped around that capability forms the real fault line. Two funds that appear broadly similar on the surface may be materially different once an adviser looks at legal domicile, feeder arrangements, liquidity mechanisms, hedging arrangements and fee terms.

That is why Murphy places such weight on what he describes as primary-level due diligence. Presentation decks and summary research are not enough. Nor is a basic questionnaire. The real work involves access to data rooms, comparison across first, second and third-party sources, and a detailed effort to understand how incentives and risks interact through the product chain.

His examples are instructive. An Australian fund may feed into a US or Cayman vehicle, each subject to different disclosure rules and portfolio constraints.

A globally invested fund may be hedged back into Australian dollars. This can create liquidity challenges. It can also cause cash management issues. These problems are not obvious from the pitch material. Fee structures vary widely. Managers charge management and performance fees in different ways. They calculate fees on different asset bases. These choices create either alignment or friction.

Murphy’s point is that advisers cannot afford to gloss over these details just because the underlying asset class sounds compelling.

Due diligence has to go deeper than before

Murphy ultimately frames private markets as an area where research discipline needs to improve, not relax. Because these products are more complicated than traditional listed funds, they demand more analyst time, more source material and more scepticism.

Genium, he noted, can spend weeks assessing a single product, precisely because the interactions between structure, strategy and incentives are so layered.

He also points to broader industry trends that make this work more urgent. Large traditional asset managers are buying private market specialists. Product shelves are expanding quickly. Global managers are trying to distribute private assets into wealth channels at speed. Each of these developments creates opportunities, but also the risk of cross-conflicts, inconsistent incentives and product design that privileges distribution over investor outcomes.

Advisers may well place private markets in client portfolios, but they must not approach them with the same level of shorthand analysis they use for mainstream public market funds. This is an area where product design, legal structure and operational robustness can matter just as much as manager pedigree. In a market selling excitement, Murphy is arguing for something less glamorous and more necessary, a much harder look under the hood.