5 minute read

What is private market investing?

💵 Investing outside of the traditional stock market exchanges
The difference between public and private markets

The public market is available to the general public.

The private market is often the focus of institutions, accredited investors and qualified purchasers
Public Markets
In the public markets, companies sell shares to the general population, who can then buy, sell or trade these shares on a stock exchange. When someone invests in the stock market—whether individually or through a program like a 401k—they own a small portion (a share) of the public companies they’ve invested in.
Often larger and more mature, public companies are heavily regulated by governmental organizations like the Securities Exchange Commission. To ensure they remain accountable to shareholders, these companies are also required to disclose information about their performance, which makes it easy to see their financials, revenue and more.
Key Characteristics
Accessibility
Open to the general population through exchanges and retirement accounts
Liquidity
Investors are able to access their money whenever they need to buy selling investments on exchanges
Transparency
Public companies are regulated by the SEC and are required to disclose company financials
Familiarity
The general public is familiar with and active in public markets through 401K, Apps or Exchanges
Private Markets
In the private markets, assets or companies are not publicly traded. Institutions and individuals work with asset managers or tech-enabled firms to directly invest in various alternative assets. These assets could include span a range of classes.
Key Characteristics
Exclusivity
Private markets are generally limited to professional investors (or very wealthy invdividuals)
Diversity
Investors can invest in a wide range of alternative asset classes and complex industries.
Illiquidity
Investors have a longer time horizon and generally must invest for 6mo-10yrs without access to funds.
Complexity
Often investing with asset managers and other entities involve a lot of paperwork and guidance
Why People Invest
Private markets allows investors to diversify their portfolios in ways public markets do not
Reasons Why People Invest in Private Markets
Institutions and wealth families generally have longer time horizons and seek to manage risk by investing in alternative assets.
  • Inflation Hedge - Private market investing can offer potential inflation hedging benefits, particularly for select infrastructure, real estate and natural resources strategies.
  • Reduced Volatility - Valuations for private assets typically happen less frequently than for public assets, usually quarterly, so they don't tend to experience the same market volatility as public markets.
  • Return Potential - Private capital markets have historically outperformed public assets over the long term, tapping into non-economic risk premia (e.g., illiquidity premium).
Why It Matters?
On average over $34 trillion is invested in private markets each year by institutions.
Private Markets Depth and Breadth
Private market investments provide a range of exposures depending on the risk/return, cash flow and correlation characteristics investors are seeking. Therefore, it is important to consider the role of private markets within your total portfolio:
Asset Classes
Private Credit
Includes loans to companies, real estate developers, etc.
Private Equity
Includes venture capital, buyouts, secondaries and growth equity
Private Real Assets
Includes real estate, infrastructure, farmland and timberland
Private Speciality
Includes digital assets, art, wine, shipping, etc.
Asset Class Goals
Income
Allows investors to generate passive income to support current investment or lifestyle needs
Growth
Longer term investments that allow capital to appreciate over time without regular distributions
Balance
Investments that produce moderate income, but also have exposer to capital appreciation in the long term