Private Markets: An opportunity worth exploring

Investing in private markets in 2022

Where do we see the best opportunities in 2022?

We think it has become increasingly important for in­vestors to consider exposure to private markets. In our view, private markets offer a combination of high po­tential returns, a long-term focus, and access to innova­tive and fast-growing businesses.

Twice a year, our Private Equity in Focus video series will update you on the latest developments in private equity and broader private markets, and where we see the best opportunities. Explore the latest video.

Key investment takeaways

Our preferred approach to investing in private markets, as in public ones, is to diversify. Investors should allocate to various private equity funds across geographies, managers, strategies, and vintage years (starting year of the fund). Strategy diversification reduces dependence on any single factor or strategy exposure. Geographic diversification reduces dependence on a single economy or region. Manager diversification reduces the risk of over-exposure to the biases of any single fund manager. Vintage year diversification ensures investors are exposed to the opportunity set and market conditions across time, to mitigate performance variance between funds launched in different years.

For investors focused on both sustainability and financial returns, private markets investments offer an opportunity to deploy capital toward incremental, measurable impact that goes beyond what is generally achievable in public markets.

Currently we favor exposure to managers who are disciplined with capital deployment and are able to source investment opportunities in companies that can withstand inflationary and interest rate pressures. From a thematic perspective, we favor digitization, healthcare, energy transition, and Asia as a region. Finally we see direct lending, core real estate and core infrastructure as useful strategies to generate yield while mitigating inflation and interest rate pressures.

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What are private markets?

Private markets are an umbrella term for assets that are not traded on public exchanges. Investors in private markets face a wide menu of options in terms of asset class, investment strategy, or mode of investment.

Private markets are still very much overshadowed by listed assets in scale. Assets under management for private equity are equivalent to roughly 5% of the value of publicly traded stocks. But private markets are gaining in popularity. While private market investments require investors to lock up funds for longer, they have historically been rewarded with higher returns.


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