Advisors' top concerns: liquidity and factor analysis

Welcome back to the Alt Goes Mainstream podcast.

Today’s episode dives into how data and market structure are shaping private markets.

We sat down in MSCI’s New York office with Luke Flemmer, the Head of Private Assets at MSCI to discuss how standardization and normalization of data can help bring efficiency, transparency, and liquidity to private markets.

Luke brings a unique perspective to private markets. He was previously Managing Director, Head of Digital Strategy for Alternative Investments at Goldman Sachs Asset Management, and was Co-Founder and CEO of Lab49, a global solutions provider of investment and risk technology to asset managers and investment banks.

When the ION Group acquired Lab49, Luke became Co-Head of ION’s Capital Markets Division, delivering software and solutions to the group’s global financial services customer base.

Earlier in his career, Luke worked in the fields of robotics and artificial intelligence. He is a CFA charterholder.

Luke and I had a fascinating conversation about private markets market structure and how MSCI is playing a role in driving standardization, normalization, and transparency of data in private markets. We covered:

• Parallels to market structure evolutions in equities, fixed income, FX, and derivatives.
• Tradeoffs of transparency for private markets participants.
• What it will take to build transparency and price formation in private markets.
• Where investors will still be able to find durable alpha.
• What standardization and normalization of data means for secondary markets.
• Analogies between Greek mythology and private markets.
• How secondaries has gone from a trade to a portfolio management tool.
• How index creation will impact private markets.

Thanks Luke for sharing your wisdom, expertise, and passion at the intersection of private markets and market structure.

Show Notes
00:00 “Data Wants to be Free”

00:28 Welcome to the Alt Goes Mainstream Podcast

01:02 Sponsor Spotlight: Ultimus Fund Solutions

01:57 Private Markets, Data, and Market Structure

02:17 Meet MSCI’s Luke Flemmer

04:26 From Robotics to Finance: Automation Needs Standardization

05:18 Fixed Income’s Transformation: From Trading Floors to E-Trading

06:42 Connecting the Data Across the Lifecycle

07:58 Harmonized Data → Transparency → Liquidity

08:44 Scaling vs Information Asymmetry

10:38 What More Transparency Does to Returns and Alpha

11:15 Benchmarking Privates Like Publics: PMEs and Comparable Data

12:35 Manager Skill and Illiquidity Premium

14:14 Company-Level Data & Bilateral Origins

16:19 The Ship of Theseus Parable and Should Privates Become Public?

23:17 COVID, Denominator Effect, and LP Scrutiny

23:50 The New Baseline for Private Funds

24:15 Wealth Channel Tailwinds and the Rise of Active LP Portfolio Management

25:23 Using Public Liquidity to Balance Private Illiquidity

26:15 The 85/15 Public-Private Index: Why Blend Public Equity with Private Equity

27:16 Daily Pricing Private Equity: Solving the “Stale Marks” Problem

28:15 Smoothing, Stickiness and Forced Secondary Sales

29:20 What Tech/Data You Need to Nowcast PE Daily (and What’s Still Missing)

30:31 Price Formation Feeding Better Indexes

31:34 From Secondaries to Derivatives: Lessons from Fixed Income NAVs

33:14 Building Trust in Private Benchmarks: Data Scale and Adoption Over Cycles

33:53 Unlocking 401(k)s: What Must Be True for Wealth to Go Big in Privates

37:05 Liquidity, Suitability, Risk & Factor Decomposition

39:05 Durable Private Markets Alpha (and the Index Question)

41:51 Standardizing the Language: Defining “Liquidity” and MSCI as the Connective Tissue (Wrap)

A Word from Our Sponsor, Ultimus

This episode of Alt Goes Mainstream is brought to you by Ultimus, the full-service fund administrator and transfer agent powering asset managers in private and public markets. As alts go mainstream, you need real expertise to handle complex fund structures, connect with key distribution partners, and handle sophisticated compliance, reporting, and transparency demands.

That’s Ultimus: high-tech, high-touch solutions for over 450 clients and 2,500 funds with $775B in assets under administration. Backed by an expert team of over 1,200 employees, they place client service at the core of their business, helping you navigate complexity during your fund structuring or launch and then supporting you through every stage of growth. Whether you’re already in the market or thinking about entering private wealth, you can trust their team’s deep expertise in retail alternatives to help you reach your goals.

Learn more at ultimusfundsolutions.com or email info@ultimusfundsolutions.com.

We thank Ultimus for their support of alts going mainstream.

Editing and post-production work for this episode was provided by The Podcast Consultant.