Why invest in private markets?

Private markets are a long-term class of investments, which are not traded on public stock exchanges. The most important investment strategies on private markets are companies (private equity), loans (private debt), real estate (private real estate) and infrastructure projects (infrastructure). The volume of these investments has risen sharply in recent years.

Four different strategies are generally used on private markets: private equity, private debt and private real estate and infrastructure investments.

Private equity (companies)

The private equity strategy involves equity investments in unlisted companies. With well over 60 percent of all assets managed on the private markets, these account for the largest share. They offer you as an investor an equity-like participation in the company and a return.

Private debt (loans)

This strategy focuses on non-exchange-traded debt securities. Private debt managers specialize in extending loans to companies or arranging debt restructuring. They procure, extend and negotiate debt instruments with debt holders. For you as an investor, the resulting risk is similar to a credit.

Private real estate (real estate)

At the heart of these strategies is the acquisition of real estate. Private real estate managers focus on purchasing first-class properties, renovating, or repositioning properties or on real estate development projects. Private real estate investments offer you a degree of protection against inflation and are subject to lower fluctuations in value than traditional investments.

Private infrastructure (infrastructure projects)

Private real estate investments offer you a degree of protection against inflation and are subject to lower fluctuations in value than traditional investments. When you invest in infrastructural facilities such as airports, ports, electricity, telecommunications, water supply, waste disposal and recycling, bridges, customs roads, hospitals, and schools, you as an investor receive a portion of the income. This remains stable regardless of price changes, as the infrastructure is still in use. Like real estate, private infrastructure investments are less exposed to fluctuations in inflation and value than traditional investments.

If you as an investor are willing to relinquish some control over your investment and sacrifice more liquidity and transparency than you would have with exchange-traded products, but want to tap into additional sources of returns, the following reasons speak in favor of private market investments.

Private markets offer you potentially higher returns with a longer-term focus than traditional markets. You also gain access to selected and fast-growing companies. Combined with a traditional portfolio focused on the public markets, this opens up new, diversified investment opportunities for you.

Compared to public markets, private markets are less volatile and less sensitive to news. This frees these companies to focus on long-term value creation, which sets them apart from companies on the public markets.
Long-term capital commitments are required for investments in the private markets. If you are confident that you will not need to draw on the invested capital during the term, private market investments can be an interesting addition to your portfolio.