As high-net-worth investors increasingly look beyond traditional stock-and-bond portfolios, demand for private equity, real estate, and other alternative strategies is accelerating. PCM Encore, led by Founder & CEO Michael Paulus, has embraced this shift by expanding into direct private market investments while maintaining its tailored, white-glove wealth management model. With a client base ranging from younger tech founders with concentrated equity positions to legacy-minded families focused on generational planning, the firm is positioning itself at the intersection of bespoke advisory and the expanding alternatives landscape. 

Paulus discusses what’s driving client appetite for alternatives, how PCM Encore approaches manager diligence across asset classes, and why today’s macroeconomic backdrop—defined by high inflation, shifting rates, and market volatility—is creating both opportunities and misconceptions for private market investors. 

CM: What are you seeing in terms of client demand for alternative asset classes as investors seek more diversified sources of yield?  

MP: The enhanced returns provided by private credit within relatively liquid evergreen structures has drawn a lot of interest. The recent headlines around interest rate cuts and changes at the Fed have investors concerned about inflation, so assets like infrastructure and private real estate that can provide yield, appreciation, and inflation protection are of interest. 

CM: What’s your approach to manager selection and due diligence?  

MP: Our approach is dependent on the asset class. To describe a few key examples: 

• For direct indexing, we seek the lowest cost and a manager with a proven track record and scale, as well as maximal features (such as different index options, ability to customize indexes, etc.). 

• For private equity, we look for differentiated strategy and deal flow. We are looking for managers that provide differentiated sources of alpha and return and that can enhance the resilience of our portfolios. Given the tax efficiency, low cost, and liquidly of direct indexing, our bar is very high. It’s a tall order to outperform on an after-tax and after-fee basis for the taxable individual investor. 

• For private credit, scale, differentiated underwriting, and access to deal flow is important. Particularly within evergreen structures, the ability to both deploy capital effectively at scale and provide liquidity throughout credit cycles is critical. 

• In venture capital and technology, we recognize that access to top funds and investors is crucial. We battle for allocation to the market leaders and work to identify the best emerging managers.  

CM: Your client base spans from younger, tech-focused founders to families engaged in legacy planning. How do their investment priorities differ, and how does that shape your advice?  

MP: A common thread in our client base is a focus on creating resilient portfolios that maximize after-tax performance. Our younger founders often have highly volatile and concentrated holdings in technology companies, so they are looking for the rest of their portfolio to balance that risk. More established families with intergenerational investment horizons look to their portfolios as significant wealth builders.   

As entrepreneurs ourselves, so many of our conversations with clients are focused on the psychology of money and defining their legacy. Being a family office means giving peace of mind to clients, and that is highly individual.   

CM: For younger clients, is there more appetite for growth-oriented private equity and venture strategies, while legacy-focused families lean toward income and preservation?  

MP: It’s not necessarily a hard and fast rule. While we certainly advise clients with clear income needs, above a certain threshold, portfolio resilience and long-term growth become the driving goals across clients. This is particularly true in high-tax states where there is a high cost to driving an income-oriented portfolio. We have seen legacy-focused families inquiring about high-conviction growth and private equity deals, especially since investments for their children might have a much longer time horizon. 

Since the beginning of 2021, we’ve seen cumulative inflation of nearly 20%. Given our clients may live into their 90’s, even income-focused portfolios need to provide a degree of inflation protection and growth. 

CM: How do you help clients understand and navigate the illiquidity, risk, and reporting complexities of alternatives?  

MP: We are very conscious about sizing allocations around alternatives, and we have the conversation on a client-by-client basis. Alternatives can be powerful diversifiers, but we typically do not let them exceed certain percentage thresholds relative to a client’s overall balance sheet, with many of the top fund managers having their own guardrails in place to prevent over allocating at the client level. Typically, when a client inquires about alternatives with us, we will have a separate conversation with them to discuss the merits and risks involved, along with the liquidity and reporting complexities. The plus side is that a lot of the evergreen private wealth vehicles available today have monthly liquidity, so lock ups are not as rigid as some of the traditional drawdown funds. 

CM: With alternatives becoming more accessible through interval funds, tender offer funds, and private placements, do you think access democratization is ultimately positive for investors?  

MP: Structures like evergreen funds have helped solve real pain points around capital calls, access, and liquidity.  However, there has also been a broader influx of products into the market, and not all funds and private opportunities are created equal. Some may struggle to deploy capital quickly enough to keep up with investment inflows, and there’s also the risk that some vehicles may prioritize AUM growth over investment quality, which can impair returns. The general trend we have seen over the past decades has been a compression of fees and that has benefited the retail investor tremendously. Ultimately, manager selection is incredibly important in alternatives, and I do worry the average retail investor is ill-equipped to discern the best opportunities from those not worth the cost.  

CM: What do you see as the biggest misconception among clients about investing in private markets?  

MP: Not all private opportunities are created equal. Two investors can be in the “same company,” but the underlying deal terms may look very different. One fund might have gotten in at a favorable valuation with strong structural protections, while another may have invested later at a sky-high valuation with additional layers of fees. This is particularly common in the venture world and with SPVs, where “access” is marketed as the differentiator, but the actual economics can vary widely. The misconception is that access alone drives outcomes, when in reality, valuation discipline, structure, and manager quality matter far more in determining long-term results. 

I also think clients tend to focus on the overall brands, like Blackstone or Apollo, rather than focusing on the specific investing team and strategy of a fund, which is far more important to driving performance in our view. 

CM: What’s your outlook on how the current macro environment—rates, inflation, and global volatility— will impact alternative investments in the near term?  

MP: Our current view is that rates are expected to come down, though by how much and how fast remain uncertain. While inflation has decreased, it still sits above the target, and we are facing a softening labor market. The stock market is near all-time highs, making now a particularly interesting environment.  

Regarding alternatives, many strategies could benefit, but it’s of course situational and manager dependent. Private equity has historically outperformed public equities in times of higher inflation, and, if rates come down, it will be beneficial for borrowing costs and M&A activity. Infrastructure looks attractive given inflation resistance, and particularly with secular tailwinds around AI and digitization. On real estate, PCM Encore remains constructive on multifamily in strong job markets with favorable demographic trends, especially given the slowdown in new construction starts in 2025 coupled with ongoing demand and lower construction costs.