Smarter Position Sizing Can Unlock Better Private Market Outcomes

In Sizing Private Market Investments (BlackRock, Sept 2025), the authors outline a probability-based framework for constructing more resilient multi-alternative portfolios.

• Traditional mean-variance tools misjudge private markets due to skewed return distributions, liquidity risk and deal dispersion—risk must be sized by outcome probabilities, not volatility.

• Optimal diversification varies by asset class: private credit benefits from more positions, while infrastructure can be sized more concentratively, and buyout equity sits in between.

• A dynamic “optimal sizing” approach improves risk-adjusted returns versus naive equal allocation, balancing diversification, operational complexity and long-term targets.

How can allocators translate deal-level risk into portfolio-level conviction and allocation discipline? The full report provides a practical framework and case study for implementation.