The role of private markets in a diversified portfolio

Beyond the headlines

As public and private markets continue to converge, advisors are seeking to understand the evolving role of alternatives in portfolio construction.

Some recent commentary forecasts losses of 20% to 30%. Actual annualized distribution returns, however, have held between 9% and 10%, and that gap is shaping the way advisors talk to clients about private credit. The mismatch comes down to incentives. Media coverage and product fundamentals aren't always aligned, and it's easy to conflate a compelling headline with what a strategy is actually built to deliver. Floating-rate, senior-position credit is structured around a longer time horizon than daily-liquidity vehicles, such as stocks and ETFs, which forecasts tend to measure against. In this episode of Inside WealthTech, Blue Owl Head of Private Wealth Madeleine Sinclair explains where the headlines and the actual returns diverge, and why the fundamentals underneath private credit haven't changed—even as the coverage around it has.

Rapid-fire reflections

From education to infrastructure, Sinclair's answers to Inside WealthTech’s speed round don't hedge:

Each answer points the same direction. Rather than focusing on a new feature or product, Sinclair sees clear value in the education, platforms, and processes that turn curiosity into access.

Stay Inside WealthTech

Watch the full episode of Inside WealthTech with Madeleine for more on private credit, portfolio diversification, interval funds, and the future of private wealth distribution.

And follow along on LinkedIn for upcoming episodes spotlighting the leaders redefining wealth management through technology, data, and collaboration.

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Explore Envestnet's primer on alternative investments to see how interval funds and other structures are helping advisors extend diversification into models.

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Full transcript

Envestnet Inside WealthTech – Blue Owl

Interviewer: Welcome to Inside WealthTech. We're live here at Envestnet Elevate in Phoenix, Arizona.

Interviewer: I'm Principal Director of Investment Solutions Strategy, and we're joined by Madeleine Sinclair from Blue Owl. Madeleine, thank you for joining us today.

Madeleine Sinclair: Thank you. Delighted to be here.

Interviewer: Maybe you could share a little about your background and give us an elevator pitch on what has made Blue Owl such a consequential force in private markets and private wealth.

Madeleine Sinclair: Thank you for having me.

I've been in the industry for more than 26 years and have been with Blue Owl for five years. I currently serve as Head of Private Wealth for the Americas. Prior to joining Blue Owl, I spent a number of years at BlackRock helping grow the iShares ETF business.

As for why Blue Owl has become the force it is today, a little background is helpful. We are an alternative asset manager with more than $300 billion in assets under management across three investment verticals: direct lending and private credit, real assets, and GP strategic capital.

What has really driven our growth over the last five to six years is that, from the firm's inception, we were very intentional about partnering with private wealth advisors. We're celebrating five years since our IPO in May 2021, though the firm itself has been around for more than a decade.

From day one, we committed to private wealth, ensuring that advisors and their clients had access to the same strategies, pricing, and opportunities as institutional investors. I think that has made a meaningful difference.

Today, you often see traditional asset managers developing private market capabilities, or alternative managers that have historically focused only on institutions. Our differentiator is that we've always focused on private wealth alongside our institutional business.

Interviewer: Blue Owl is part of the next wave of interval funds being onboarded to the Envestnet platform.

As alternatives move from standalone allocations into diversified model portfolios, what changes for advisors, and what are the benefits of incorporating these strategies into models?

Madeleine Sinclair: It's incredibly exciting to be at this frontier where alternatives are becoming part of model portfolios.

Before talking about models specifically, I'd say what excites me most is what private markets can do for portfolio construction overall, whether through standalone allocations or model-based implementation.

When I speak with advisors, I focus on two key benefits: diversification and income generation.

Advisors today face a challenging environment. They need to help clients meet investment objectives while navigating geopolitical uncertainty, inflation concerns, interest rate questions, and market volatility. Building consistent income streams can be difficult.

That's where Blue Owl excels. Our focus is on creating durable income strategies that can provide dependable monthly cash flow for investors.

The other major benefit is diversification. One statistic I frequently reference is that 86% of companies generating more than $100 million in revenue are private.

At the same time, a relatively small number of public companies are driving a significant portion of S&P 500 performance. Advisors should consider how private markets can expand the opportunity set available to clients.

Regarding our interval fund, we're thrilled to be included in the development of Envestnet's models. Our asset-based finance strategy offers daily tradability, which helps simplify operations.

That's where the industry is headed. We're trying to make these products easier to access, easier to subscribe to, and easier to evaluate alongside the rest of a portfolio.

The interval fund structure provides operational simplicity while allowing advisors to assess the strategy's role and risk profile within the broader portfolio.

Interviewer: You highlighted two clear value propositions: durable income and diversification.

Advisor interest in alternatives is growing, but confidence and implementation readiness vary significantly. How is Blue Owl approaching advisor education and helping firms move from interest to practical portfolio implementation?

Madeleine Sinclair: Education has always been a core part of our commitment to private wealth.

We have an award-winning platform called The Nest, which serves as a central educational resource. It's a one-stop destination for everything related to Blue Owl and private markets more broadly.

Advisors can access thought leadership, investment insights from our professionals, and educational resources designed to improve understanding of private markets.

Looking ahead, we're increasingly focused on helping advisors understand how our strategies fit within total portfolio construction. That includes working with Envestnet around our interval fund and exploring how multiple Blue Owl strategies can potentially be combined to create income-oriented portfolio solutions.

Interviewer: Private credit has been in the headlines recently. How should advisors separate fact from fiction when evaluating what's being said about the asset class?

Madeleine Sinclair: In many cases, the headlines are outrunning the fundamentals.

What that tells me is that we're still in the early stages of education. While we've made meaningful progress, there's still more work to do.

One area where we can improve is simplifying the language we use. Industry professionals understand terms like "floating rate" or "top of the capital stack," but those concepts don't always resonate with end investors.

We need to do a better job of translating industry jargon into language that's easier to understand. We also need to better explain how private market strategies differ from traditional daily liquidity vehicles such as stocks and ETFs.

That's where I see the industry's biggest opportunity.

It's appropriate for people to ask questions and challenge assumptions, but sometimes headlines create confusion about what's actually happening within the asset class.

For example, someone reading headlines might assume private credit is experiencing significant declines. In reality, the asset class has demonstrated a relatively stable performance profile and has delivered annualized distribution yields in the high single digits over time.

Interviewer: Blue Owl is certainly positioning itself for the opportunities ahead.

Before we wrap up, what are you reading or watching right now that you'd recommend?

Madeleine Sinclair: I recently attended a conference, and I'm also working through estate-planning matters with my extended family.

A book that was recommended to me is The Psychology of Money by Morgan Housel. Since I'm serving as executor of my family's estate, I found it particularly relevant.

I would recommend it to any financial advisor.

The book explores what truly drives investment outcomes, and often it isn't just the fundamentals. Human behavior and emotion play a tremendous role.

Through a variety of examples, it highlights how behavioral and emotional factors influence decision-making.

I think you can see that dynamic playing out in areas like private credit as well.

Interviewer: Couldn't agree more. That's required reading.

Interviewer: We'd like to finish with a speed round. Ready?

Madeleine Sinclair: Sure.

Interviewer: Advisor education: biggest barrier or biggest opportunity?

Madeleine Sinclair: Biggest opportunity.

We're still in the early innings. Private credit has expanded quickly, but there's much more work to do. Growth will come from helping advisors who are interested but haven't yet made meaningful allocations.

It's about showing them how.

Interviewer: Portfolio construction: public-private convergence or still fundamentally separate?

Madeleine Sinclair: Definitely convergence.

Interviewer: What will drive private wealth distribution: product expansion or platform transformation?

Madeleine Sinclair: Platform transformation.

Creating a more unified subscription process for private markets will be essential, and technology will play a major role.

Interviewer: AI and alternatives: competitive edge or table stakes within five years?

Madeleine Sinclair: Table stakes.

Interviewer: Higher-for-longer interest rates: tailwind for private markets or underwriting stress?

Madeleine Sinclair: We focus on long-term investing. For us, fluctuations in interest rates don't change our ability to pursue outcomes for clients over the long run.

Interviewer: Madeleine, that's all the time we have today. Thank you for joining us.

Madeleine Sinclair: Thanks for having me.

Interviewer: That was Madeleine Sinclair of Blue Owl, and this has been Inside WealthTech. Thank you.