Private Markets: An opportunity worth exploring

Investing in private markets

An award-winning strategy

With the number of concerns in the market today, it can be useful to focus on long-term structural growth opportunities and for investors to consider exposure to private markets.

We explain the importance of private markets and how private investors should think about it as part of their portfolio in the current environment.

What are private markets?

Private market investing explained

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.

Where do we see opportunities in private markets

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.

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