Yesterday afternoon I was on the Cranborne Chase in bright sunshine. We broke our walk along the Shire Walk with a couple of dogs to look south and in the clarity of December afternoon sunshine we saw across Dorset to the towers of Bournemouth and south east to the Isle of Wight. The west of Dorset was imagined.
I thought of my friend Chris Bunford in Southbourne who I had speaking to about our both having been brought up in Dorset and I explained that my father was our true Dorset man.
As we spoke, me in Cranborne , he by the sea, it occurred to remind myself and introduce him to a man who is dead nearly eight years. I wrote about him last at the end of winter 2018; the title came from an article 17 years before in the Guardian
Balm for both body and soul – and from a politician to boot
Geoffrey Tapper is not a typical well-to-do GP
When Tapper started work, the financial disparity between the two jobs became obvious; in 1955, his first year as a hospital house-physician, his salary was £320- exactly the amount that his father earned in his final year as a superintendent minister. What’s more, Tapper’s mother underwrote her son’s finances when he joined his first practice in North Dorset; she bought him a house for £4,600.
Forty years on he still lives there and thinks it’s worth about half a million. Tapper and his wife benefit still further from this investment because it’s a large former farmhouse, with plenty of extra accommodation to rent out. He retired as a GP in 1990 and his NHS pension is now £22,000 a year. So, as he says, there’s never been a problem with money.
And yet Tapper is by no means your typical, comfortably-off retired GP. At nearly 70, he’s Dorset County Council’s Chairman of Social Services. Although he followed his mother into the Conservative party in his youth, Tapper converted to the Liberals. From 1993 to 1997 he had the distinction of being leader of the Liberal Democrats’ largest council: ‘In Dorset there were more people under the control of the Liberal Democrats than there had been at any time since Lloyd George,’ he says.
Tapper went into local politics out of Christian motives. ‘I wanted to help the underprivileged. When we took over from the Conservatives, social services spending was 23 per cent below the figure that the Government reckoned the council should be spending. The Tories had been spending the money on roads. I admit that since my time as leader, the roads in Dorset have deteriorated and I’m not ashamed of that.’
Although Tapper is standing down as a councillor in May, he’ll still be busy, working for better care for the elderly through various local organisations he’s founded. But he plans to mark his seventieth birthday with a trip to the Eastern Mediterranean to ‘follow in the steps of St Paul’. (He’s been a Methodist lay preacher for nearly 40 years.)
Looking back, he believes he made the right career choice as a boy – but not because of the money: ‘I made a better GP than I would have made a Methodist minister. My father had about a dozen churches during his career because you have to move around. As a GP you can’t do that because patients like to get to know their own doctor. I was lucky enough to be able to practice in Dorset, where my family has been since 1572. I love Dorset, and would have hated to leave it.’
I hope that Chris will continue as my father did, being productive for at least four decades to come!
Two Dorset men of different generations and professions, Chris an actuary , Geoff a GP. I thought of both as I looked over Dorset from the Cranborne Chase.
I am sitting in a house dominated by tradition, it has been my mother’s place since the late 1950s and is still lived in by her and her children. My early memories of family life were us gathering around the TV for certain key programs, many of which were at Christmas. This year will be different. No one can decide on anything to watch.
The TV now streams from a variety of places, mostly Sky and Netflix and fights for attention with phones and laptops for the attention of us all – this Christmas we are all over 60. To say that kids are breaking the monopoly of TV stations with subscriptions is not held out in Shaftesbury.
Where the BBC and ITV hold on is in the production of news programmes but drama and shows are falling away. There has been no dancing in this house and its occupants dislike the soaps, turning to the web to stream what matters to them when they want to watch it.
There simply isn’t a desire to organise meals around set pieces, there isn’t a Queen’s Speech for my Mum and nothing to replace the Morecambe and Wise show, these past 25 years. This is not to say that the screen isn’t used, but nowadays it is booked for what the family regularly stream and a second “study” is available for those who opt out and want to watch what would have been a mainstream program but recently.
I know tonight I will be gently laughed at as I slip into this study to watch (as I do) Emmerdale. They say I am addicted, they know the sport slots for them , they know the dramas and the programmes on archaeology and history but they are not fed them, they are selected from searches.
I am not sorry that what is happening is happening. The BBC will spend most of the next three years fighting with the American Government a lawsuit about an injudicious act of editing, ITV and Sky will become one , delivering a web based service for everyone and those households that can’t access programmes via the web will download old fashionably by dishes or (dare I say it) by aerials.
This Christmas I returned to a house that has stood in this place over 250 years , a quarter of which in the possession of its current owners. Easily the most remarkable person in it is the mother who is demanding change of her sons who live with her. I no longer live here but I see at Christmas a congregation of minds that have turned from being served information to demanding it. Our Television is no longer a place to watch the TV channels that appear at the top of this blog but a means to deliver information about what the occupants discuss at the table, on walks or driving around Dorset.
A tribute to my mother who still finds new ways to find things out!
It is not just youngsters who are driving change, though the grandchildren show us how , it is the oldies in this house who have taken control in a way that is bad news for TV.
Neither Christmas nor Eve are words that have much use to our marketing departments. Xmas is a good way to get the holiday and its spend to a wider incidence by taking Christ out of things.
Eve is a great girl but not a descriptor of a day’s significance other than as a day to give people something (source AI- Oxford)
Presumably courtesy of some keen marketer!
Kylie started out ten years ago with Christmas but that really wasn’t meant to last so let’s look back at the original album with wistfulness.
Working day for grinches
I will sit down with my team this morning with half of us working tomorrow on Christmas (it’s not an Hindi thing). We will have to find a quiet room in the family house in Shaftesbury to discuss CDC, SIMPI and NDAs, all of which need work on them if AgeWage is to progress to a pension mutual. I have been told that “mutual” is another dying word but it stays for this Christmas!
We will do a full day’s work , though we won’t spoil it for those who see Xmas Eve as an opportunity to take money from us. The roads of Shaftesbury in Dorset were heaving with vans delivering last minute Christmas presents to families using Amazon, Tesco and many other fine marketers of Xmas wonder!
But for me and my team, today is a work day and tomorrow a sacred day to Christ. So Mr and Mrs and Ms and other gender contrivances, I will not wish you a happy Xmas Eve gift as I am no doubt going to have to in future years. I will side with the grinch.
“Nothing is easier than self-deceit. For what every man wishes—that he also believes to be true.”
—DEMOSTHENES (349 BCE)
Summary
It has been two months since my last newsletter, which is largely due to the amount of thought and effort required for this one. It argues that today’s private markets boom exhibits the same structural conditions that have preceded past financial crises. The three defining attributes are segmented risk creation, near-perfect alignment of incentives across an expansive supply chain, and a deeply rooted but flawed assumption about the nature and durability of private markets. Drawing on more than 200 years of financial history—and using the 2008–2009 Global Financial Crisis as a reference point—it shows how institutional allocators, investment consultants, fund managers, wealth advisors, trade associations, academics, and the trade media each act rationally according to their own incentives while collectively amplifying systemic risk.
By tracing the sources of these dynamics upstream, it becomes clear that the rapid growth of evergreen and semi-liquid private-market vehicles is not innovation, but rather a late-cycle mechanism for warehousing illiquid assets, delaying price discovery, and sustaining the appearance of stability. The warning here is not about bad actors; it is about a system whose incentives have become so tightly aligned that, if stress emerges, the resulting damage could be severe. Retail investors, positioned at the end of this speculative supply chain, must be especially vigilant.
The Speculative Supply Chain
After studying multiple financial crises over the past 235 years, I developed a deep respect for an uncomfortable reality: the most damaging crises are almost never caused by a small group of bad actors. This realization lays bare the flawed, but instinctual human, preference for simple and swift explanations. In the aftermath of a crisis, this is why we tend to gravitate toward narratives that bluntly assign blame to a handful of villains for having caused the entire event. This may feel emotionally satisfying, but it is rarely accurate.
To be clear, there will always be a subset of individuals who engage in especially egregious—and sometimes illegal—behavior, and they should be dealt with in proportion to the severity of their actions. But this alone is not nearly sufficient to explain systemic financial crises. Far more often, it is the product of millions of actors taking billions of small actions across an expansive and siloed supply chain. Each participant acts according to incentives that seem consistent with their immediate responsibilities and are defensible locally. Many may feel discomfort when bending rules, threading loopholes, or simply extracting more value than they contribute because they can, but few envision how doing this collectively, simultaneously, and without meaningful accountability mechanisms can produce outcomes wildly disconnected from any single person’s intent.
The tragic irony is that millions of individuals responding rationally to perfectly aligned incentives at the same time have historically proven far more dangerous than a small group of especially bad actors. Such conditions preceded crises in the 1810s, the 1830s, 1907, 1929, 1999, and 2008–2009.
Today, I strongly suspect we are observing the same conditions in private markets. This newsletter explains why.
Key Attributes of a Speculative Supply Chain
One way to understand speculative episodes is to think of them like manufacturing supply chains. Based on the experience of past financial crises, three core attributes consistently emerge. Each is outlined below using the 2008-2009 Global Financial Crisis (GFC) as a reference point.
1️⃣ Risk Segmentation
Segmentation of risk in an assembly line-like formation is a crucial component of a systemic financial crisis. Each segment adds risk to the production process, but it is extremely difficult for any participant to fully understand how the risk compounds as it moves through the system.
During the GFC, independent mortgage originators relaxed underwriting standards to increase loan volume. Those loans were then sold to investment banks, which repackaged them into mortgage-backed securities. These securities were then purchased by institutional investors, placed into funds, and ultimately sold to retail and institutional investors. Many participants at each station likely sensed that risk increased locally, but few considered whether it was being further amplified elsewhere in the chain and how those amplifications compounded. Figure 1 shows the key components in the GFC and the house of cards that emerged at the end.
The relative isolation of different segments of a speculative supply chain is what makes systemic crises so difficult to see in real time. Almost no participant has sufficient visibility. In The Big Short, what distinguished figures like Michael Burry and Steve Eisman was not intelligence alone, but rather it was their unusual visibility into the entire supply chain. They were intelligent for sure, but many equally intelligent people failed to recognize the danger simply because they lacked the same visibility.
2️⃣ Incentive Alignment
The second attribute required for a systemic financial crisis is the near-perfect alignment of incentives among all participants. In many cases, alignment extends well beyond direct participants.
During the GFC, mortgage originators, investment banks, and fund managers all shared a common incentive to increase the volume of mortgage production and the issuance of mortgage-backed securities. But the alignment did not stop there. Additional risk amplifiers included ratings agencies (e.g., Moody’s), specialized insurers (e.g., AIG), and prominent voices in the financial media. Each benefited directly or indirectly from higher origination volumes, greater securitization activity, and expanding asset pools.
Critically, no major participant had a strong economic incentive to slow the assembly line. Fee structures, compensation models, market share dynamics, and political pressures all leaned heavily against restraint. Had even one systemically important segment been incentivized to reduce production volume or tighten underwriting standards, the crisis may have been averted—or at least rendered less catastrophic.
3️⃣ Deeply Rooted But Flawed Assumption
“There is no national price bubble [in real estate]. Never has been; never will be.”2
—DAVID LEREAH, chief economist, National Association of Realtors (2004)
At the core of every speculative episode lies a nearly universal assumption that later proves to be fundamentally wrong. In the 1810s, Americans purchased farmland aggressively thinking that wheat prices would remain elevated indefinitely. In the late 1920s, Americans believed it was safe to purchase stocks on margin because they assumed equity prices would never suffer sustained declines. During the GFC, people assumed that residential real estate prices would never decline on a national level.
The presence of a widely held—but fundamentally flawed—assumption allows participants in a speculative supply chain to systematically underestimate the incremental risks that they add to the system. Because the flawed assumption is rarely questioned and instead reinforced by recent experience, it provides the psychological comfort necessary to allow risks to remain unchecked.
The Private Markets Supply Chain
Historically, the aforementioned attributes were observable prior to the onset of a major financial crises. It is alarming, therefore, that all three are now visible in private markets. From end to end, each participant in the supply chain operates with incentives that are nearly perfectly aligned to increase production and overlook the erosion of underwriting standards. Moreover, indirect participants, such as the trade media, trade associations, and even academia, amplify production pressure and/or grant unearned legitimacy to the final product. The role of the major participants in the private market supply chain are as follows.
Direct Participants
1️⃣ Institutional Allocators
Over the past 25 years, staff at institutional investment plans (often referred to as allocators) have dramatically increased allocations to alternative asset classes (Figure 2). A large portion of inflows have gone to private equity and, more recently, private credit funds.
The herd behavior began in earnest soon after investors noticed the exceptional returns produced by the Yale University Endowment between 1985 and 2000. Many allocators assumed that blunt allocations to alternative asset classes were the key ingredient of Yale’s success. Moreover, they assumed that the Yale model was broadly replicable and scalable across institutions with vastly different governance practices, relative scale advantages, and access to professional talent. As allocations expanded, however, the underlying incentives subtly shifted from exploiting a perceived opportunity to preserving the professional roles that the opportunity created.
Over time, compensation, career progression, and job security became inexorably linked to the complexity of allocations rather than objective analyses of the results that they produced. Deviating from that framework by streamlining portfolios and reducing costs introduced substantial career risk. Once these incentives were firmly entrenched, allocations to private markets became self-reinforcing, while reductions became increasingly risky to allocators. These incentives remain extremely powerful today.
Figure 2:Growth of Alternative Asset Class Allocations in U.S. Public Pensions, 2001-2024
Source: Public Plans Database (PPD). Asset allocation data from “National Data – Asset Allocation for State and Local Pensions, 2001–2024.” Author’s calculations.
Note: “Alternative assets” defined as private equity, real estate, hedge funds, commodities, and miscellaneous alternatives as reported in the Public Plans Database. Categories combined by author.
2️⃣ Investment Consultants
“U.S. plan sponsors managing over $13 trillion rely on investment consultants for advice about which funds to invest in…We find that consultants’ recommendations of funds are driven largely by soft factors, rather than the funds’ past performance, and that their recommendations have a very significant effect on fund flows, but we find no evidence that these recommendations add value to plan sponsors.”3
—TIM JENKINSON, et. al. (September 2013)
Investment consultants first emerged in the late 1960s to perform independent performance reporting for institutional investment plans. In this role, consultants measured and compared the performance of portfolios which, at the time, were typically managed by bank asset-management departments.
Over the past five decades, however, consultants slowly but steadily expanded their roles. Performance reporting was supplemented with asset-allocation advice, portfolio construction, manager selection in public markets, and eventually facilitation of access to private markets. In other words, what began as an independent oversight function morphed into a portfolio design role.
A big problem is that, while consultants are now the architects of institutional portfolios, they never relinquished title to their roles as independent performance reporters. In effect, consultants reinstated the very conflict of interest that they originally sought to resolve.
More importantly, investment consulting firms are now deeply dependent on portfolio complexity. Introducing new asset classes, tinkering with existing strategies, and continuously replacing managers sustains perceived relevance and justifies fees. Yet, at the same time, consultants bear little accountability for long-term outcomes. When results disappoint, responsibility is attributed to some combination of markets, managers, and asset class cycles rather than calling into question the quality of the advice offered by the architects themselves.
The result is a powerful incentive to increase complexity without experiencing commensurate accountability for the results.
“Investment discipline is the phrase that’s got to come back and be talked about. In the beginning, the innovators of this idea, of whom I was one, had a great deal of discipline . . . What has happened is imitators by the hundreds have gotten into this business and as imitators flocked in, discipline has eroded.”4
TED FORSTMANN, founder of Forstmann Little (1996)
Modern private equity funds trace their origins to the late 1970s and early 1980s. The United States was emerging from the Great Inflation, and several powerful tailwinds converged for the benefit of this nascent industry. U.S. corporations had diversified excessively, interest rates were falling, and equity valuations were rising. These conditions created fertile ground for leveraged buyouts and allowed private equity to generate extraordinary returns.5
By the 1990s, those tailwinds had faded. Corporate structures were leaner, interest rates settled, new fund managers proliferated, and returns moderated. By the end of the twentieth century, private equity returns had compressed closer to public market equivalents, especially after considering underlying fees and the administrative costs of maintaining exposure. The industry remained influential, but its prior record of generating excess returns proved difficult to sustain at scale.
Following the GFC, a related opportunity emerged. Banks tightened lending practices as they rebuilt their balance sheets and adapted to tighter regulation. This created a void in credit markets, as many strong companies struggled to obtain credit. Private credit fund managers rushed to fill the void. Early capital providers generated exceptional returns, which attracted followers. From 2005 to 2024, private credit AuM grew from less than $100 billion to $1.7 trillion in the United States alone (Figure 3).
Figure 3:Total U.S. Private Debt Assets Under Management ($ billions), 2000-2024
Sources: The Wall Street Journal, CION Investments, Prequin, KKR.
Today, private equity faces a fundamental challenge. Portfolio companies are increasingly difficult to sell at the values carried in fund portfolios. Public markets and strategic buyers are uninterested in supporting exits at current valuations. This has created a backlog of roughly 30,000 companies that remain stuck in aged portfolios.6
The private-equity model depends on realizations, as capital must be returned to investors to maintain revenue and make room for new fund launches. Continuation vehicles, interval funds, and evergreen structures have emerged as a solution to the backlog. These vehicles provide liquidity without reliance on traditional exits. Many also incorporate private credit exposure, further accelerating the growth of the newest and fastest-expanding segment of private markets.
More importantly, these structures weakened a critical constraint that once governed the industry. Historically, private-equity fundraising was restricted by realizations. Capital could not be raised indefinitely without exits. By recycling assets within a closed system and substituting liquidity mechanisms for true exits, that governor has been weakened. Fundraising is no longer tightly tied to realizations, allowing capital accumulation to continue even as exit conditions deteriorate.
“I strongly believe that unless we avoid these and other errors and false principles we shall inevitably go through a similar period of disaster and disgrace [as Barings Bank in 1890]. If such a period should come, the well-run trusts will suffer with the bad as they did in England forty years ago.”7
PAUL C. CABOT, founder of the first U.S. Mutual Fund (March 1929)
The most dangerous investment vehicle in the private markets supply chain is the evergreen fund. These vehicles are the final destination for aged private equity positions and direct or secondary purchases of private credit positions. Evergreen funds provide investors with exposure to these illiquid assets through structures that promise periodic liquidity. Given their placement at the end of the supply chain, they are packed with risk, yet they continue to accumulate assets at a breathtakingly rapid clip (Figure 4).
Figure 4:Growth of Evergreen Funds ($ Billions) (2015-2025E)
Sources: Pitchbook, CapGemini World Report Series 2024 (January 2025), Hamilton Lane.
In many ways, evergreen funds are performing the function of a bad bank. In past financial crises, impaired or difficult-to-exit assets were carved out into separate vehicles so they could be worked out over time without forcing immediate loss recognition across the system. That is effectively what evergreen private market funds have become. They function like a mechanism for warehousing unresolved losses, delaying price discovery, and sustaining the appearance of attractive performance in a late-cycle environment.
Unlike traditional banks, however, evergreen funds perform these functions without being subjected to bank-level transparency, strict capital requirements, or liquidity regulation. Investors are often led to believe they are getting diversified portfolios of private equity and private credit positions; few fear that they are providing long-duration funding to absorb liquidity shortfalls generated elsewhere in the system. Instead, this reality is obscured by marketing language, structural complexity, and selective comparisons to traditional investment funds.
Few investors know that reported returns for these funds are often inflated by the recognition of large, one-day gains. Moreover, while liquidity is prominently advertised, it is highly conditional. Redemptions are limited to a small percentage of NAV (typically 5% per quarter) and subject to gates or suspension under even modest levels of stress. At the same time, investors bear an unusually heavy fee burden. Management fees at the fund level, incentive fees that are frequently assessed on unrealized gains, and layered fees from underlying managers can total in excess of 500 basis points. (Figure 5).
Figure 5: Estimated Layers of Fees for the Hamilton Lane Private Assets Fund
True believers who dismiss the possibility that the NAVs report
ted by these funds may not reflect the realizable value of the underlying assets may find little comfort in recent developments in public markets reported by people like Leyla Kunimoto and Jason Zweig. Faced with liquidity demands, a small number of funds have permitted investors to exit through public offerings. In each case, however, the public market proved unwilling to provide liquidity at valuations anywhere close to reported NAVs, revealing a meaningful gap between stated values and clearing price.8
“These markets are the next frontier, full of boundless opportunities for Americans who want to save for a home, their children’s education, and their retirement. Our goal, is to help them seize those opportunities, so they can achieve their American Dream.”9
—ERIC J. PAN, President and CEO, Investment Company Institute (2025).
The final station in the private-markets supply chain is occupied by wealth advisors. It is also where the most aggressive sales activity can be observed.
Wealth advisors do not create private markets products, but they play a crucial role in distribution to retail investors. They deliver the message that lacking scale and access is no longer an impediment to investing in private markets. In this capacity, advisors serve as the last station before private markets truly exit the assembly line.
The incentives are straightforward. Private market products appear to offer higher expected returns, a differentiated narrative relative to competitors, and fee structures that can materially increase advisor revenue relative to traditional public market portfolios. Illiquidity can be reframed as protection against panicked selling; valuation opacity can be reframed as reduced volatility; and complexity can be reframed as a sign of sophistication. These features make private markets exceptionally attractive from a business development perspective, particularly in an environment where fee pressure on traditional advisory services is intensifying.
But unlike their clients, investment advisors are insulated from many of the risks. Performance is evaluated over long horizons; liquidity constraints can be attributed to product design rather than advice quality; and unfavorable performance can be explained way as a market feature rather than a lapse of judgement. On the other hand, asset growth is rewarded immediately. In combination, this creates a powerful incentive to allocate client capital in private market vehicles, often via evergreen funds.
The Amplifiers
It is difficult for a speculative supply chain to operate efficiently when skeptical opinions debunk marketing pitches. Voices of skepticism can extinguish exuberance and slow the speculative assembly line to a crawl. They are like rust on the gears of a conveyer belt.
This is why the most dangerous speculative supply chains are those in which all potential sources of skepticism are not merely muted, but are rather converted into vocal advocates. When a message laden with opportunity, inevitability, and safety is amplified simultaneously by multiple trusted intermediaries, the system acquires dangerous momentum. In the case of private markets, the key amplifiers are the trade media, trade associations, and even academia.
6️⃣ Trade Media
The trade media is among the most misunderstood participant in the private-markets ecosystem, largely because many readers fail to recognize that its role is structured for advocacy by design. Investors often operate under the naïve assumption that trade media exists primarily to report trends rather than to amplify them. In practice, however, members of the trade media are indirectly beholden to the industries they cover.
Trade publications, podcasts, and conference organizers typically depend on revenue generated from sponsorships, advertising, event attendance, and access journalism. These business models create powerful incentives to reinforce prevailing narratives rather than challenge them. Amplifying the status quo is commercially rewarded, while skepticism is not.
In 2025, private-market growth stories attract online attention, drive conference participation, and increase sponsorship demand. Skeptical coverage, by contrast, risks alienating advertisers and sources without offering comparable upside. It is therefore unsurprising that coverage emphasizes access, innovation, and growth while downplaying structural risks, conflicts of interest, and historical precedent.
The irony is that if the trade media openly acknowledged its structural bias, the resulting damage would likely be less severe. It is the misperception that no such bias exists that makes its influence especially pernicious.
7️⃣ Trade Associations
Trade associations exist to advocate for the commercial success of their members, but oftentimes they present themselves as if their mission lies elsewhere. Nevertheless, the greater the pressure that members apply to advocate for their interests, the more aggressive trade association messaging becomes.
Private market growth has clearly become a strategic priority for many companies operating throughout the investment supply chain, and relevant trade associations are responding accordingly. Policy statements, press releases, research reports, and public testimony increasingly frame expanded access as a clear benefit to investors rather than the companies selling the products.
One example that has risen in prominence recently is the Defined Contribution Alternatives Association (DCALTA). Their stated mission is to “help bridge the information gap on how to effectively incorporate non-traditional investments into defined contribution plans.” This may seem like an innocuous goal on the surface, but it should be viewed with caution. Listed below are the members and alliances of DCALTA.
Figure 8: DCALTA Members, Alliances, and Board Members
According to a recent report by With Intelligence, six of the ten firms on the list (shaded in red) rank among the top ten evergreen fund providers—and many more names are unranked evergreen fund managers.10 The thread running through this newsletter is that understanding the incentives of supply chain participants and amplifiers provide critically important context clues. The names on this list are key funding providers to DCALTA, which gives them a powerful voice in the content of educational materials and events.
8️⃣ Academia
“Many an academic is like the truffle hound, an animal so trained and bred for one narrow purpose that it is no good at anything else…when something was obvious in life but not easily demonstrable in certain kinds of easy- to-do, repeatable academic experiments, the truffle hounds of psychology very often missed it.”11
—CHARLIE MUNGER, former vice-chair of Berkshire Hathaway
Academia is often presumed to function as an unbiased voice of reason—producing research that is methodical and independent of commercial influence. But accepting this assumption at face value would be a mistake. Academic finance is populated by human beings, and no human on the planet is fully inoculated from incentives. Research agendas are shaped by funding sources, data availability, and institutional partnerships. Entire research centers are often supported by industry sponsors. Moreover, as Charlie Munger observed, academic research shows a structural preference for identifying narrowly bounded nuance within existing frameworks rather than challenging the foundational assumptions on which those frameworks rest.
More broadly, many universities and business schools have built substantial portions of their curricula, research agendas, and career pipelines around private markets. These programs educate students, place graduates, attract donor funding, and reinforce institutional relevance in an area of growing demand. All else equal, this creates a structural bias toward viewing private markets as durable innovations rather than as late-cycle phenomena.
In such an environment, it becomes difficult for academic institutions to conclude that private markets may be experiencing a bubble—much less that one may already exist.
Conclusion
“We knew the long boom in general and mortgage credit in particular exhibited all the classic signs of a mania, including the widespread belief that housing prices would never fall to earth…But we didn’t appreciate the extent to which non-banks were funding themselves in runnable ways.”12
—TIMOTHY GEITHNER, former Secretary of the Treasury (2014)
In the early 2000s, real estate speculators, loan originators, investment bankers, credit-default-swap issuers, and complacent members of the financial media erected a financial house of cards. The collective danger was hidden in small, incremental contributions made by millions of individuals acting in unison under the shared illusion that real estate prices could never decline on a national level. Not only was this assumption false—real estate prices had declined nationally in the 1810s, the 1830s, and the 1930s—but the very act of believing a decline was impossible made it more likely to occur. And it did.
In 2025, nearly everybody believes that private markets offer diversification benefits and return enhancement that will never deteriorate. In fact, the number of actors with nearly perfectly aligned incentives raises the question of whether the term “supply chain” is too innocuous. A more accurate analogy may be a rail gun—a weapon that uses perfectly aligned magnets to accelerate a solid projectile to velocities exceeding seven times the speed of sound. Anything in its path suffers devastating consequences.
The financial system has quietly assembled the equivalent of a financial rail gun, and the projectile has exited the barrel. It is uncertain when it will hit or how extensive the damage will be. But if you are a retail investor, it would be prudent to steer clear of its path.
The relentless sales pitches promising privileged access to private markets may make you feel attractive.
Yesterday, Pensions UK took the right step in publishing research it did in September with Yonder Consulting on over 2,000 randomly suggested “savers” hoping for a pension that would meet their later life needs.
There is something important here, an admission that the pensions industry has been rather less than clear and prone to hiding the truth from people. The truth will out and as we enter 2026, the year when we hope the dashboard is “ready”, the question should be will the industry be ready for the clarity and accessibility of the dashboard. Below is the statement made by Pensions UK.
I suspect that telling people what their pots are worth as pensions is not the kind of clarity they look forward to , the dashboard not the accessibility that people thought would happen when they were in control.
What Pensions UK asked the press to publish
UK pension savers want simpler, more accessible ways to manage their retirement savings, according to a new survey from Pensions UK.
Savers have clear preferences for how they receive information. Email updates are the most popular, chosen by 62%, followed by websites (44%) and paper statements or letters (37%). Mobile apps (30%) and official Government updates (30%) are also widely used, while employer communications (28%) and financial advisers or in-person advice (24%) continue to play an important role. Newer channels such as video guides (13%), webinars (7%), social media updates (6%), and AI or chatbots (5%) remain less popular, although younger savers (18–24-year-olds) show higher interest (social media 11% and AI or chatbots 8%). Only 4% said they do not want to receive any pension information.
The survey also highlights areas where savers feel less confident. Knowing how much they should be saving for retirement (28%), planning for an adequate retirement income (26%), understanding the impact of inflation on future income (25%), and navigating tax rules for contributions or withdrawals (around 20%) are top concerns. Other issues, including knowing how much they have in all of their pensions (20%), investment choices (15%) and responsible pension options (10%), are less common but still notable.
Most savers are committed to long-term security and want methods and communications that make pensions easier to understand and manage. More than three-quarters (77%) want to see all their pensions in one place, and 61% support automatically combining multiple pots. Nearly four in five respondents (79%) say they value the ability to choose how their pension is invested, showing the importance they place on transparency and personal control.
Matthew Blakstad, Deputy Director of Strategic Policy and Research at Pensions UK, said;
“Many pension savers want to engage with their retirement savings, and have the relevant information at their fingertips. They want to see all their pensions in one place, combine pots automatically, and make informed decisions about how their money is invested.
“Providers and the Government must make pension information clear, simple, and accessible through the channels people actually use. Improving communication is not just a convenience, it is essential for helping these savers take control of their retirement.
“As we gear up for the new year, with personal finance planning top of people’s minds, and with yet more changes coming to pensions policy, there is no better time than to act on these findings. We believe that every pension member who wants to engage should have easy access to relevant information, so they can understand their options and engage confidently with their savings.”
It is an indictment on us that we are not offering people information that they can understand and make use of. This is not the finding of countries in Scandinavian Europe who have had made clear accessible disclosure digital for some time.
I hope that if not in 2026 , as soon as possible after, people will be able to find the clarity on their phones and laptops when they press “show“. What they see may not be what we would like them to see, but that is Torsten Bell’s point, we really need to work on pension value for the money in their pots.
Long overdue
I trawled through the photos on this blog five years, this is one that I downloaded five years ago.
There was in December 2020 something new about putting relevant information on our screens. Now we have become used to it in most areas of our lives. Sadly we do not yet have open and accessible information that we can use to manage the later stages of our lives – financially.
I and a wide group of colleagues are considering becoming the proprietor of a CDC pension scheme that we make available to employers who agree with the Government that going collective could increase the pension paid to their staff after they retire by up to 60%.
I consider that this is rather take it or leave it. If you take it as right for your staff you will swap from a workplace DC pension scheme and if you don’t or aren’t sure, you will wait till you are clear what’s best.
If you are an employee, you won’t have much choice, you will either have a DC pension savings plan or a CDC pension plan and you won’t have much choice (I can’t see employers running both).
My career has been split between 20 odd years as a regulated adviser and the same again working with employers and trustees but not being seen to advise in a regulated way.
But now we have a new world where individuals who are considering their pension planning can get targeted support and I’ve been most taken by the opportunity this gives advisers to talk in a new way while giving advice. I am so interested I decided to speak to the Innovation Support team at the Pensions Regulator who are supporting me and my friends as we get ready to getting out CDC scheme authorised.
So I put these questions to my legal support
“We will want to offer Targeted Support to many members and eventually manage a segregated fund, as proprietor.
We are considering, once we have the name agreed and the company in instance, whether the proprietor’s company should be authorised by the FCA.
Can you confirm that you consider the proprietor being authorised by the FCA from outset helpful or necessary?”
This was my question and what follows was the answer
“we’re not setting any expectation that a proprietor should be FCA regulated (although it is obviously for you to ensure that any required authorisations are obtained) and we don’t necessarily rely on or take into account regulation by other regulators, although I would note that if the proprietor is FCA regulated, there may be more disclosure needed in your submission to us to explain the position”.
My take is that while Targeted Support can be offered to people considering their pension as a whole (DC pots, DB pensions, State – the lot), the job of the owner or proprietor of a CDC plan is not to provide Targeted Support let alone full advice to the people in the CDC plan.
This has come as something of a relief. If what CDC pays (pension that goes up with inflation) needed support or advice, then I suspect there would have been a complexity that had crept into the concept.
This may be where the 20 years advising adviser takes issue with the non-advisory consultant I’ve been since I was 45. As I get older, I find that taking choices is getting harder and therefore the phrase “you’ll have to take advice on that” is becoming more painful to me! My younger advisory self would have been shocked that I’d done him out of a job.
I know that my DC pot (now consolidated – though that was a bother) is still to be paid back to me via annuity or flex and fix deferred annuity or as I please using “freedoms”. I went to the launch of multi-employer CDC in October and was the only person at the round table who asked his own question. I asked “can I swap my pot for a CDC pension?” and asked it with passion! I asked it to Torsten Bell, the pension minister.
He looked at me with that “you’re trying to catch me out” look he has, but I wasn’t. He said that I would need to wait and see and I was going to follow up with one about “targeted support” but he gave me a look that told me not to!
In conclusion, CDC seems to me a good thing for people who don’t want to have to pay to get advice or take chances without doing so. You will just get the pension that your money earns and a very highly regulated outcome (if the Pension Regulator are true to fashion with DB pensions and DC freedoms).
You can of course make it a very complicated business , but for most people the choices will be down to how much extra to pay as “AVCs” and how to protect the family.
Yesterday I questioned why a financial giant a quarter of a century ago (Equitable Life) should be being split up between American finance houses so it can eat up more of our pension schemes and convert pensioner surpluses into secure rates of return for those abroad. Today “Utmost” will be owned by a couple of American holding companies as their private equity.
It need not be so, ten years ago Pension Bee wasn’t started, now it is quoted on the stock exchange and very little thank it does. Ros Altmann and Sharon Bowles requested that the Pensions Bill include investment companies who are critical to the survival and then growth of the Stock Exchanges second tier.
Earlier this morning, I printed an article from Jason Stockwell , our new Lord speaking on Investment for the Government. I fall into the camp that follows him and believe that Britain’s problem is not economics . It’s belief.
Against that thinking is the belief that we simply cannot compete with the distribution available to American companies, and to the globalisation of capital markets, that makes our stock exchange insignificant.
Well let me throw Pension Bee at you, a firm that is taking on America in America, I have heard a lot of complaints about capitulation of British financial companies but not much praise for Pension Bee.
Yet neither it , nor many of the other stocks that I see mentioned by the London Stock Exchange are much promoted as British, either in our press or in political circles.
It is also easy to forget that despite the drumbeat of economic worries in the UK — from the Brexit referendum in 2016, to the “mini” Budget in 2022, which sparked ructions in financial markets — its strengths in finance alongside its start-up, innovation and talent ecosystem provide attractive buying opportunities. In April, BlackRock’s CEO Larry Fink said the fund manager was investing in UK assets “across the board” citing the country’s “fundamentally strong attributes”.
I live next door to Paternoster Square, pictured above. It is our equivalent of Wall Street but we do not have our Stock Exchange on tours of my part of the City. We focus on St Pauls, quaint pubs and tales of the 17th century, as if the City of London is a history item. As Lord Stockton points out in the article I publish
London remains the world’s leading international financial centre, handling over 40 percent of global foreign exchange trading. British banks are well capitalised. The legal system remains trusted. These things are easy to take for granted, until you look at countries where they are missing. Trust in institutions is not a nice-to-have; it shapes expectations and behaviour long before policy changes feed through.
The failure of our £3tr invested in pension funds here in the UK, to channel capital into UK listed companies has led to the value of the stocks purchased by overseas organisations and the de-listing of the companies from the LSE. It’s a bargain takeover market for private equity firms and their funds. The FT don’t like it
While the UK remains a leader at founding and incubating world-class companies, especially in fields such as artificial intelligence and biotech, the foreign interest reflects the fact that Britain lacks a deep enough domestic capital pool to scale them up into global players. The risk is that as international buyers scoop up companies before they reach maturity, decision-making centres move abroad.
Britain may share less of the future growth and wealth generation than if companies had remained UK-owned. By sapping future growth drivers, this dynamic also risks reinforcing weak equity market valuations, making further foreign takeovers more likely.
The challenge for UK policymakers is to harness the global interest while also rebuilding confidence and capital at home, so British firms are able to grow, consolidate and compete without feeling compelled to sell. A clearer growth strategy and more policy stability would be a start.
I don’t like it either and I hope that 2026 will see us stopping sending our pension capital on the slow boat to Bermuda, as funded reinsurance. The LSE organised a group of CEOs of companies quoted by them to write a public letter to the Chancellor of Exchequer, requesting money come to them. That letter has got some stick in pension circles as interference in fiduciary independence. I know one or two of the CEOs on the list and they are not being selfish and disruptive, they are merely looking to compete as British quoted companies.
We know we have more money in the magnificent 7 US tech stocks than in UK equities!
Our CEOs are looking for an answer to the problem they face, that of being bought out in Britain’s bargain takeover market – the London Stock Exchange.
Well Christmas is many things , but I wouldn’t expect you to think of it as a halfway point between the annual and investment conferences staged by the NAPF, PLSA Pensions UK!
But we have been hard at it some months since Manchester and it’s three months till Edinburgh.
There are some other familiar faces I know well but I’m looking to hear this man- if I can!
Here’s what he had to say that Christmas is also about looking forward! Thanks to Jason for putting this up , come on – the days are getting longer- summer’s drawing in!
Britain’s problem is not just economics. It’s belief
Lord Jason Stockwood
Entrepreneur, UK Minister for Investment and Member of House of Lords
Britain has spent much of the past decade talking itself down. The dominant story is one of decline: weak growth, stagnant productivity, brittle public services and a politics that seems permanently stuck. Some of that story is deserved. But not all of it. And when pessimism hardens into orthodoxy, it starts to shape outcomes. That is one of the central arguments in Fixing the holes in economics: better theories for better growth, a recent paper by David Halpern, which reminds us that economies do not move on fundamentals alone. Sentiment, trust and momentum matter. Markets respond not just to policy, but to how credible and confident the story around that policy feels.
This matters for the UK because, relative to other advanced economies, the fundamentals are stronger than the mood music suggests.
Start with living standards. After years of erosion, real wages in the UK are finally rising again, by around two to three percent over the past year. That may not yet feel transformative for many households, especially after such a prolonged squeeze, but it matters in direction if not in drama. Set alongside falling inflation, easing energy prices and the prospect of lower mortgage rates, it marks the beginning of a shift. Britain is ahead of several comparable economies where incomes remain flat. This is not an abstract statistic. Politics follows pay packets. When people stop feeling poorer year on year, behaviour begins to change. Confidence returns slowly, but it does return.
Second, Britain’s service economy is often misunderstood. There is a persistent tendency to see services as a consolation prize for the loss of manufacturing. In reality, services are where much of global value is now created. The UK is the world’s second largest exporter of services, selling more than £450bn a year across finance, professional services, technology, culture and education. In a world driven increasingly by ideas, data and trust rather than containers and steel, this is a strategic advantage, not a weakness.
Third, inflation has fallen sharply and will continue to fall. From double digits in 2022 to tracking to two to three percent in the next 12 months. The UK has moved faster than many expected. That matters because it restores room for manoeuvre and It allows interest rates to fall sooner, eases pressure on households and businesses, and helps move politics out of permanent crisis mode. Compared with economies where inflation remains stubbornly high, Britain now has options again.
Fourth, institutions still count. London remains the world’s leading international financial centre, handling over 40 percent of global foreign exchange trading. British banks are well capitalised. The legal system remains trusted. These things are easy to take for granted, until you look at countries where they are missing. Trust in institutions is not a nice-to-have; it shapes expectations and behaviour long before policy changes feed through.
Finally, demographics. Britain is ageing, but less severely than many of its peers. Countries such as Japan, South Korea and parts of southern Europe are already seeing their working age populations shrink. The UK is not. That does not guarantee prosperity, but it reduces one of the most powerful structural drags on growth that others now face.
None of this is an argument for complacency. Britain still needs reform, investment and a clearer long-term strategy. But pessimism is not realism. It is a position, and often a lazy one.
The lesson from behavioural economics, as Halpern argues, is that narratives shape decisions. Businesses delay investment when they fear the future. Households hold back spending when they believe decline is inevitable. Governments that talk their own economies down should not be surprised when confidence evaporates.
Momentum is not magic. But it is real. And relative to other markets, Britain has more of it than we currently allow ourselves to believe.
There are a range of CDC alternatives for a small DB scheme to be replaced by
Pensions Oldie is annoyed with my commentator – I do not know who the commentator is. It does not matter, what matters is what Oldie says, he is holding out for the small DB pension scheme and for once I don’t agree with him/her.
I totally disagree with your correspondent’s premise that the run on of small schemes is scandalous.
The vast majority of small schemes are associated with small employers. Should small employers not be given the same flexibility to decide on the future of their scheme as larger employers? Should small employers not be able to obtain the benefits of the investment returns available on the assets in the pension scheme?
I quite agree here that employers who want control of how the pension is managed should have the capacity to influence the trustees, the risk taken and the benefits arising. This can be done more easily with a multi-employer CDC where the proprietor is either owned or partially owned by employers. I do not think that the DB master trust approach has worked very well because of the lack of flexibility in the payment that can be paid.
For many small employers, the short term cash commitments to bring the pension scheme assets up to buy-out levels would (as for 000s of others during the past 20 years) place an intolerable strain and lead to the demise of the employer, affecting its current as well as past employers and also damaging the local and UK economy.
The solvency level required of any DC scheme was absurdly high when the means of achieving it was not achievable through investment, only by extortion on the sponsor by the trustees (aided and abetted by TPR). But had the flexibility of a pension in payment (one that cold go up or (rarely) down), then extra contributions would not need to increase.
For others in so called “surplus” should not the employer be able to benefit from the investment returns on the scheme assets, in the knowledge that they can be re-invested in the employer either through a refund or more efficiently by funding continuing DB accrual and thereby reducing its future employment costs compared to competitors constrained by DC contributions.
I agree that CDC does not have the option of a contribution holiday, but just as the need to decrease pensions is rare, so the point when a scheme genuinely has too much money is equally rare. For the most part, the smoothing of missing or exceeding targets is over time and will not cause problems to the contribution rate!
I think it is rich for the insurance broker mindset to say that small employers should buy their over-priced insurance policies when the risk to the smaller employer is that a handful of former employees might live for slightly longer than expected and outstrip the growth in the pension scheme assets as actually invested, and not as assumed in a valuation.
I cannot think of any other circumstance where an employer would be sorry to hear that a pensioner was still alive. If they were fortunate to have pensioners living longer than anticipated, so be it. It is a happy problem that will be dealt with if and when it arises. I think we must live with some problems!
The real killer for the small DB schemes are the administration costs forced on them by an over-burdened regulatory regime and pension consultants over-selling their services, including so called “risk transfer”!
Here I am totally with you. The problem is the poor VFM from pension administration and having worked in a DB orientated pension consultancy for 10 years, I can but apologise.
This excellent blog from Punter Southall breaks down the costs that small DB funds face and asks whether there is a hope of bringing down the costs.
The article concludes
Defined benefit pension schemes are expensive to run and are only getting more costly, despite being largely legacy arrangements with significantly improved funding positions. Accounting standards aim to clarify costs but inconsistent application and exclusion of key expenses mean the picture remains unclear. With the rapid rise of consultancy fees and VAT rules evolving, sponsors should be carrying out an honest review of what their scheme truly costs and ensure this is accurately reflected in their accounting disclosures.
The failure of administrators and investment managers to work efficiently is surely an argument for superfunds and not for many separate small funds.
If this is the way that Royal Mail allows the message to seep out to its 110,000 members, then “doh”! I hope that it is mad at the FT – as I am.
The first six months of its CDC plan (October to March) happened to be poor markets. At the end of March 2025 markets were in haywire due to the trump tariffs.
Look at the principal world market from October 2024 to March 2025(left)
And look at what happened the other side of March and you see how markets work (right). To say this is how CDC works is wrong. We all know that and it’s neither good journalism (FT) or good message management (Royal Mail) to have this headline
It is ludicrous to make a story out of a year’s return but if you want it, here is the bump that happened from October to March and here’s what’ happened since – worse will happen and the collective pensions plan is stress-tested for much worse!
Bad first half of the year, good second half; first half picking up all the setting up expenses of getting going, second half will have been free of some of these.
The Royal Mail Collective Pension Plan, a collective defined contribution (CDC) scheme launched in October last year after six years of planning, dropped 4.6 per cent by the end of March, compared to a 3.6 per cent decline in its benchmark index, according to its results seen by the Financial Times.
….people familiar with Royal Mail’s CDC, which has 110,000 members, stressed that it was too early to draw conclusions about payouts in the long term. The fund was just getting started, and flows and timing had an outsized impact on returns, they added.
I agree with this comment with regards transparency
and this needs to be explained to regulators and to members in a way that makes sense. We do not want to have reporting that makes a benchmark into the pole vault.
The ups and downs of the scheme against the asset and liability expectations are based on accrual and pensions in payment estimated in decades not months. There will be great things and awful things happening within a workforce and future pensioners, We can expect the numbers with the Collective Plan to stretch over 80 years with 20 year olds and centenarians building and getting benefits from the same fund.
We are escaping the fate that pensions were creating for Royal Mail. A DC scheme insured by Scottish Widows having been bought out by Zurich. This DC scheme was offering post men and women no security from the markets as the collective scheme does. Instead it was offering drawdown or annuity, neither of which made sense to people who had been promised pension. There was a DB, indeed more than one DB plan, standing behind the postmen but they were not accruing nor could they, and Royal Mail stay solvent.
What happened, thanks to the good sense of Royal Mail management and the progressive thinking of their unions (principally the CWU) was the CDC scheme. It is a CDC scheme unique to Royal Mail, Royal Mail with 110,000 active workers is unique to Britain. We should be very proud that it has an opt out of only 700 staff despite being contributory.
John Ralfe is right that postal workers in the Royal Male Collective Plan need to be sure of what they are going to get and how it is calculated. I have been on the site and I am confident that postal workers do get it and that John would get it too.
The FT is being really irresponsible in reporting the progress of the scheme in this way. I would like any reader who is uncomfortable with what Royal Mail is doing to spend some time on the member website.
Look at the principal world market from October 2024 to March 2025(left)
