What Are Private Markets and Why Are Investors Considering Them Today?

Key Takeaways

• Private markets represent a large share of the economy. Most U.S. companies generating substantial revenue and the vast majority of real estate assets are privately owned.
• Public markets are increasingly concentrated. The shrinking number of publicly listed companies has led to greater sector concentration and correlation.
• Private investments may offer an illiquidity premium. Investors willing to commit capital for longer periods have historically been compensated with higher return potential.
• Value creation often occurs before IPO. Many successful companies are staying private longer, meaning a substantial portion of growth happens outside public markets.
• Private markets can enhance diversification. Lower correlation to public equities and bonds may help reduce volatility and improve risk-adjusted returns.
• Private equity, private credit, and real assets each play distinct roles. Together, they can provide growth, income, and portfolio stability.

A Growing Universe of Private Market Investments

When investors think about building a portfolio, they typically think of publicly traded stocks on exchanges like the NYSE or NASDAQ, or bonds such as U.S. Treasuries and municipal securities. For decades, public equities and fixed income have formed the foundation of traditional investment strategies.

But there is a vast and growing universe beyond public markets that many investors are only beginning to explore.

As public markets have become more concentrated and correlated, investors and advisors are increasingly turning to private equity, private credit, and private real assets to enhance portfolio growth, diversification, and long-term stability.

At Curi Capital, we believe private market investments have evolved from ‘alternative investments’ to becoming an important component of modern portfolio construction for many investors.

What Are Private Markets?

Private markets refer to investments that are not traded on public exchanges. Rather than buying shares in a publicly listed company or purchasing a bond on the open market, private market investors commit capital directly to privately held businesses, real estate, infrastructure, or private credit arrangements between borrowers and lenders. Because these investments do not trade publicly, they are typically held for longer periods and are not subject to the daily price fluctuations of public markets. These investments generally fall into three main categories:

• Private Equity – Investments in privately held companies
• Private Credit – Direct loans and other debt investments made outside public bond markets
• Real Assets – Investments in physical assets such as real estate, infrastructure, and natural resources

Historically, private market investing was largely limited to institutional investors such as pension funds, endowments, and sovereign wealth funds. Today, access has broadened, allowing more private investors to participate in this expanding segment of the global economy.

Why Consider Private Markets Now?

Exposure to a Broader Set of Economic Opportunities

One of the most compelling reasons to consider private investments is simple: most of the economy is privately held:

• Approximately 87% of U.S. firms generating more than $100 million in revenue are privately owned.¹
• Roughly 93% of real estate assets are privately held.²

Many property types, including industrial facilities, senior housing, and student housing, tend to be minimally represented in public markets and often overlooked when investors limit themselves to public REITs.

Meanwhile, the pool of publicly listed companies has shrunk over time. Public companies today tend to be larger, older, and increasingly concentrated in a handful of sectors. This concentration can lead to greater correlation across public equity markets.

By investing solely in public securities, investors may unintentionally narrow their opportunity set. As a growing share of economic activity has shifted to private ownership, portfolio allocations may need to evolve accordingly.

Incorporating private market exposure may offer access to a wider variety of businesses, industries, and asset types

Potential for Enhanced Long-Term Returns

Another key reason investors explore private equity and private credit is the potential for enhanced returns over the long term.

Private investments are typically illiquid. In exchange for committing capital over multi-year periods, investors have historically earned an illiquidity premium — additional return potential as compensation for locking up capital.

Additionally, many high-quality companies are choosing to remain private for longer periods. As a result, a significant portion of value creation often occurs before a company ever goes public. Investors focused only on public markets may miss this earlier, higher-growth phase.

Private market managers also frequently have control or meaningful influence over the businesses or assets in which they invest. This allows them to:

• Implement operational improvements
• Drive strategic growth initiatives
• Optimize capital structures
• Execute long-term value creation plans

Because private investments are typically managed over five- to ten-year horizons, managers are not constrained by quarterly earnings pressure or short-term market sentiment. This longer time horizon can enable more disciplined and strategic decision-making.

Potential for Portfolio Diversification Benefits

Portfolio construction is not only about maximizing returns. It is also about managing risk.

Private markets have historically demonstrated lower correlation to public equity and bond markets, in part because private assets are not priced daily on public exchanges and are therefore less sensitive to short-term volatility driven by headlines or market sentiment.

Research has shown that portfolios incorporating an allocation to private markets may:

• Improve long-term return potential
• Reduce overall portfolio volatility
• Mitigate drawdowns during periods of public market stress
• Enhance risk-adjusted returns

Incorporating private equity, private credit, and real assets can serve as a powerful complement to traditional stocks and bonds.

The Evolution of Private Markets in Modern Portfolios

Private markets have matured significantly over the past two decades. What was once considered a niche ‘alternative investment’ category for large institutions has become a core allocation for many sophisticated investors.

As the composition of the global economy continues to shift toward privately held businesses and assets, we believe portfolio construction must evolve as well.

Investors who focus exclusively on public markets may be limiting their exposure to a shrinking segment of opportunity. By thoughtfully incorporating private market investments, investors can gain access to a broader opportunity set, pursue enhanced long-term returns, and build more resilient portfolios.

Risks and Considerations When Investing in Private Markets

While private markets offer compelling potential benefits, they are not without risks and require thoughtful evaluation.

First, illiquidity is a defining feature. Private equity, private credit, and real asset investments typically require capital to be committed for multiple years. Investors generally cannot redeem on demand, and distributions may be irregular. As a result, private market allocations should align with an investor’s long-term time horizon and liquidity needs.

Second, manager selection is critical. Unlike public markets, where performance dispersion among managers is often narrower, outcomes in private markets can vary significantly. Access to high quality managers with strong sourcing, underwriting, and operational capabilities can meaningfully influence results.

Third, valuation and transparency differ from public markets. Private investments are not priced daily on an exchange, and valuations are typically reported periodically based on financials or appraisals. While this may reduce short-term volatility, it also requires investors to be comfortable with less frequent pricing and reporting.

Finally, private investments remain subject to broader economic and market risks, including changes in interest rates, credit conditions, and exit environments.

For these reasons, private markets are best viewed as a long-term strategic allocation within a diversified portfolio, thoughtfully sized and aligned with an investor’s liquidity profile, risk tolerance, and overall financial objectives.

Final Thoughts

Private markets are no longer simply an alternative — they are an increasingly essential part of a well-diversified investment strategy.

By expanding beyond public equities and bonds, investors can unlock access to a larger share of the economy, participate in earlier-stage value creation, and potentially improve portfolio stability over time.

For investors evaluating whether to invest in private equity, private credit, or real assets, the question is no longer whether private markets belong in a portfolio — but how thoughtfully they should be incorporated into a long-term investment strategy.

Frequently Asked Questions About Private Market Investing

What are private market investments?

Private market investments are assets that are not traded on public exchanges. They typically include private equity (investments in private companies), private credit (non-public lending), and real assets such as private real estate and infrastructure.

Why are investors allocating more to private equity and private credit?

Investors are increasingly allocating to private markets because:

• A growing share of economic activity occurs in privately held companies
• Companies are staying private longer
• Private markets may offer higher return potential
• They can improve diversification and reduce portfolio volatility

As public markets become more concentrated, private investments provide access to a broader opportunity set.

Are private investments riskier than public investments?

Private investments carry different risks, not simply ‘more’ risk. They are typically illiquid, meaning capital is committed for longer periods and cannot easily be redeemed. However, they may also benefit from lower short-term market volatility. Investors should carefully evaluate liquidity needs, time horizon, and risk tolerance before allocating to private markets.

What is the illiquidity premium?

The illiquidity premium refers to the potential additional return investors may earn in exchange for committing capital to investments that cannot be quickly sold. Because private market investments often have multi-year holding periods, investors may be compensated for reduced liquidity. However, this premium is not guaranteed and outcomes will vary based on manager selection and market conditions.

How do private markets improve portfolio diversification?

Historically, private assets have shown lower correlation to publicly traded stocks and bonds. This means their performance may not move in lockstep with public markets, potentially reducing overall portfolio volatility and drawdowns. This characteristic may help reduce overall portfolio volatility.

Who can invest in private markets?

Historically, private markets were accessible primarily to institutional investors. Today, access has expanded through various fund structures and investment vehicles, though eligibility requirements may still apply depending on the investment. Investors should consult with an advisor to determine suitability and access options.

How much of a portfolio should be allocated to private markets?

There is no one-size-fits-all answer. An appropriate allocation depends on an investor’s:

• Liquidity needs
• Risk tolerance
• Investment horizon
• Overall financial goals

Many institutional portfolios allocate a meaningful portion to private markets, and individual investors are increasingly considering similar strategic allocations.