According to CNBC, Goldman Sachs asset and wealth management chief Marc Nachmann is warning about “deployment pressure” from the explosion of evergreen funds targeting wealthy individuals. These funds are specifically structured to allow more liquidity than traditional alternatives, but they come with a critical catch: capital must be spent immediately rather than waiting for optimal market conditions. Nachmann revealed that Goldman pays close attention to this pressure and specifically avoids giving his team deployment targets to prevent poor investment decisions. The rapid ascension of evergreen funds means too many managers are spending too much money simultaneously, which could put a ceiling on future returns or create even uglier market distortions.
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The Gift Card Problem
Here’s the thing about evergreen funds: they basically work like a gift card that loses value every day it’s not spent. Traditional private funds can wait for assets to go “on sale” during market downturns. But evergreen managers? They’re incentivized to buy whatever they can find, as fast as they can find it. And when everyone’s playing that same game, you get what Nachmann calls “deployment push investing decisions.” Basically, the tail starts wagging the dog.
Goldman’s Cautious Approach
What’s interesting is that Goldman has its own G-Series suite of open-ended funds, so Nachmann isn’t just criticizing from the sidelines. He’s in the game. But he’s taking a deliberately cautious approach by not setting deployment targets for his team. That’s pretty telling, isn’t it? When the guy running one of Wall Street’s biggest alternative platforms says “the last thing I want is anybody feeling like they have to deploy for any reason,” you should probably listen.
Where This Could Go Wrong
Now, think about what happens when you combine wealthy individuals chasing yield with managers who feel pressured to put money to work. You get exactly what Nachmann fears: deals that aren’t as good, returns that get compressed, and eventually, a credit cycle that separates the disciplined from the desperate. The scary part? This isn’t just theoretical. We’ve seen this movie before in various forms – whether it was the pre-2008 CDO frenzy or the SPAC mania more recently. When capital chases deals rather than deals attracting capital, things tend to end badly.
The Bigger Picture
So what’s really happening here? Private markets are becoming more accessible to wealthy individuals, which sounds great in theory. But the structures being created to serve them might be creating new risks. Evergreen funds solve the liquidity problem that kept many individuals out of alternatives, but they introduce this deployment timing problem. It’s a classic case of solving one issue while creating another. And with wealthy investors pouring billions into these vehicles, the stakes are getting higher by the day. The question isn’t whether there will be a shakeout – it’s when, and how messy it will get.
