Investing in private markets
Worth more than $5 trillion in 2020, up 8 percent year-on-year, private equity, one form of private investment, outperformed all other private asset classes and most public market equivalents, according to McKinsey.1
Every investor is after this kind of alpha return, but many stick to the public markets, lacking the experience and knowledge required to navigate the private market opportunity. Indeed, private markets can be hard to access, price and accurately assess their potential without the right experience or partner. But a diverse portfolio, which includes private market investing, is imperative to minimize risk and maximize returns.
Private investment consists of various forms of investments in unlisted companies and their debt. It can be in the form of a direct company investment, or via private equity or venture capital funds accessed through banks or other intermediaries. With companies generally staying private for longer these days, it can offer attractive investment opportunities in otherwise unavailable companies, providing an effective way to diversify a portfolio.2 Indeed, family offices typically allocate 29 percent of their assets to private markets. But anyone considering taking this alternative route should be aware of the differences between private and public markets and the possible consequences.