Private Markets

Key Takeaways

Opportunities

Private markets offer access to an array of opportunities in private equity, private real estate, and private credit.

Return Potential 

Private markets provide opportunities for potentially higher returns but with less liquidity and transparency relative to public markets.

Allocation

Allocations to private markets can complement traditional portfolios through diversification.

What are Private Markets?

Private market investments include assets and opportunities not accessible through public markets, such as privately owned companies and commercial real estate. Investors typically access private markets through investment managers that form investment vehicles that collect and pool capital from multiple investors, which then deploy and manage that capital on their behalf.
Private market assets are generally categorized into three primary areas:

Private Equity Funds

Invest in early-stage or mature firms that are not publicly traded. These companies could operate across a range of economic sectors and geographies.

Private Real Assets Funds

Purchase and manage residential and commercial properties, such as rental apartments and homes, advanced manufacturing facilities, warehouses, or infrastructure.

Private Credit Funds

Issue loans and other debt instruments, often to private, mid-sized companies.

Differences between Public and Private Markets

​Private market strategies typically utilize longer-term investment approaches, choosing to focus on assets that mature over time and can take time to sell. As a result, it may be necessary to hold such investments for several years before a return is realized. Because of these longer investment horizons, investors may expect higher potential returns—known as an illiquidity premium—relative to asset classes that are more liquid, or easily converted to cash.

ASPECT

PUBLIC MARKET

PRIVATE MARKET

Accessibility 

Issuance of stocks or bonds available to the general public including professional investors. 

Accessible by a limited number of accredited investors, qualified purchasers, or institutional investors. 

Regulatory Requirements 

Extensive regulatory oversight, financial reporting, and public disclosures. 

Greater flexibility vis-à-vis less stringent regulatory reporting requirements, and disclosures can be more limited and allow for greater confidentiality. 

Liquidity 

Generally liquid and traded on exchanges with active trading, daily price fluctuations, and often an increased focus on short-term earnings. 

Negotiated terms between investors and investment managers. Less liquid due to years-long horizons that can allow managers to focus on longer-term view. 

Illiquidity Premium 

Efficient markets limit opportunities for a premium and are more exposed to price fluctuations. 

Private investment opportunities typically seek to offer risk-adjusted higher returns to compensate for fewer or no early exit opportunities. 

Private Markets as an Asset Class

As public stocks and bonds have become more positively correlated in recent years, portfolios comprised strictly of traditional assets may no longer provide the intended diversification. Private markets can complement investment portfolios by broadening exposure while reducing the volatility of returns.

Private Equity-Infused Portfolios Can Improve Returns and Reduce Volatility: 2015-2024i

60-40 PORTFOLIO

40-30-30 PORTFOLIO

Annualized Returns 

7.7% 

7.8% 

Annualized Volatility  

10.2%

7.4% 

public equity 60%, fixed income 40%
public equity 40%, fixed income 30%, private equity 30%

Explore Private Markets Further

Explore select private market asset classes to understand better what they are, who uses them, and the potential to identify value.

Explore Private Real Estate Asset Classes

Explore select private market asset classes to understand better what they are, who uses them, and the potential to identify value.

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  • Commercial Real Estate: Refers to properties used for business-related purposes that can generate rental income and offer potential upside through capital appreciation.
  • Investment Manager: A firm responsible for managing investments on behalf of clients or investors, with the goal of maximizing returns while managing risk. Examples of investment managers could include CRE investment managers, private equity firms, or subsidiaries of major banks, etc.
  • Public Market: A financial market where securities like stocks and bonds are bought and sold openly to the public, such as stock exchanges.
  • Traditional Portfolio: Typically includes a mix of conventional investments, such as stocks, bonds, and cash.

i Bloomberg, US Agg Index, as of Q1 2025. Bloomberg, SPX Index, as of Q1 2025. Cliffwater, Direct Lending Index via Bloomberg, as of Q1 2025. NCREIF, ODCE, as of Q1 2025. Preqin, US Based Private Equity Index, as of Q4 2024.

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