Private assets have the potential to elevate portfolios through enhanced risk-adjusted returns. Successful deployment requires diligent planning and a holistic strategy.
Key Takeaways
1 Private Markets Offer Enhanced Return and Diversification Potential
Private equity, private credit, and other alternative investments are making up a growing share of investor portfolios. These asset classes have historically outperformed public markets, often by 2.5% to 4% per year. With evolving regulations and new investment vehicles, private markets are now more accessible to individual investors, offering greater diversification and the potential for higher long-term returns.
2 Integrating Private Assets Can Strengthen Client Portfolios
Allocating a portion of a traditional portfolio (such as a 60/40 mix) to private assets can improve expected returns and help smooth volatility. We find that even a modest allocation—around 12%—can lead to meaningful long-term wealth accumulation without significantly increasing overall risk. To put it in dollar terms - if an investor starts with $100,000, their wealth could increase by an additional $68,000 over a 30-year period relative to a public-only portfolio with a similar risk profile.
3 Thoughtful Planning and Holistic Management Are Essential
Private investments require careful attention to liquidity, commitment schedules, and portfolio construction. We see opportunities for advisors to help clients understand the differences between investment structures, ensure liquidity needs are met, and use comprehensive risk and funding models to manage both public and private holdings effectively.
Capital is at risk.
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