Private Markets – A Complementary Strategy

What are private markets—they usually encompass a range of investment strategies including private equity, private debt, and real assets.  Those investors who are willing to commit their capital for longer durations (several years) can access opportunities in private markets that are typically unavailable in traditional asset classes.

Private markets have generated attractive long-term returns.  Over the past 20-years, private markets have generated annual returns of 10%–15% with 12%–15% volatility.  Investment managers have similar expectations for a diversified private market portfolio in the years ahead.  Between 2% and 5% of this return represents the estimated illiquidity premium that compensates investors for their long-term commitment.  In a portfolio context, investors that are comfortable with illiquidity could consider replacing some of their bond and equity exposure with a diversified allocation to private market investments.