Alternative Allocations: Unlocking value in middle-market private equity with guest Matt Katz, Fiduciary Trust

In the latest episode of the Alternative Allocations podcast, I had the opportunity to sit down with Matt Katz of Fiduciary Trust International. Matt and I discussed opportunities in the middle market, the current exit environment, the growing role of secondaries in portfolio construction and the importance of due diligence in evaluating funds.

I began by asking Matt where he sees the most attractive investment opportunities in today’s market environment. He noted for private equity, “We've always tended to gravitate toward the middle market and lower-middle-market side of the asset class. I think it's even more prevalent today as to your point, the asset class has just continued to grow exponentially. One of the reasons that we like that space is we think there's a structural capital availability and opportunity imbalance.”

We discussed the current exit environment and subtle improvements over the last year. “You know it has been a little bit of a slog over the past couple of years, but we are starting to see signals of momentum in both deal activity and exit activity.”

“What we're really looking at is the larger end of the market to see signals there because we've been noticing there's been an uptick in exit count and exit value from 2024 to 2025. The rate at which deal count is accelerating, and exit count is accelerating, is much higher than value. So, what that tells us is that a lot of smaller deals are still getting done, but it's the larger end of the market that has yet to see an opening of exits.”

As the opportunities look attractive, and there are more funds available in the wealth channel, I wanted to probe into conducting due diligence and evaluating funds. Conducting due diligence for private markets funds can be challenging for advisors. I asked Matt about the four Ps”—people, philosophy, process and performance.

“We believe firmly that the principal asset in a private equity firm is the people. When we're speaking with folks at a firm, we look at the senior leaders. We want to know their history and experience. We want to know what their motivations are. We want to know if there's alignment of interest between us and them. We want to know if there are several senior people; do they have complementary skill sets? Are they investors and operators? And how they are building the firm for the future, because I mentioned these are very long-term relationships.”

Matt shared his views about the importance of the process used for sourcing and allocating capital. Sourcing capital can be through intermediaries or through existing networks.

“Performance-wise, at a bare minimum, you need to have above-median performance consistently. There's a wide dispersion of returns in private market performance, much wider than in public markets. At a bare minimum, you need to have that consistent performance over time. There's also a higher persistency of performance. So, if you've done it before, there's proof that you can do it again. But specifically, we want to know how they're generating that performance at the deal level.”

Given Matt’s role, and focus on allocating capital, I asked him where else he saw opportunities to deploy capital. “One area where tactically we've been seeing a lot of capital, and it makes sense just given the lack of distributions, is the secondaries market. In our mind, secondaries can be used as a tool in the toolbox within a private market allocation. Secondaries are structurally different in many ways than traditional private equity.

In secondaries, you're investing into a mature portfolio of companies and funds. What that can do is ramp up your allocation more quickly. You're eliminating the blind pool risk. At the same time, because these investments are more mature, you're going to get distributions back more quickly. So, it's a great way to get a private market allocation started.”