Private Markets
Key Takeaways
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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.
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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 apartments, single-family rental 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
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Private market strategies typically utilize longer-term investment strategies, 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.​
Private Markets as an Asset Class
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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 Boost Returns and Reduce Volatility i
i Bloomberg, US Agg Index, as of Q2 2023. Bloomberg, SPX Index, as of Q2 2023. Cliffwater, Direct Lending Index, as of Q2 2023. NCREIF, ODCE, as of Q2 2023. Preqin, US Based Private Equity Index, as of Q2 2023.
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