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This is true not only in the investing landscape itself as an alternative destination for funds, but also in the broader economy as a more efficient means of funding business growth and infrastructure development.

Funds raised for private market deals have consistently exceeded public equity issuance every year for the past 10 years.

 The total amount invested is on track to double in size to $30 trillion by the end of the current decade.

Why is this, and more importantly, how can investors be a part of it? Below, we explore the answer to these two questions in more detail.

It’s probably best to begin any ‘why’ discussion with the most relevant data: that is, do private market investments actually outperform public investments, and if so by how much?

The answer - based on twenty years of data - can be found in the chart below:

What is behind these returns? The answer is multi-faceted, but ultimately comes down to two factors: 1) a broader universe of opportunities and 2) greater potential for control.

Not only are there more private companies than public ones, but companies are staying private for longer, and increasingly taking advantage of the terms that only private investors can offer.

From the investor’s perspective, the ability to influence company decisions (e.g. through a controlling stake) and to take a longer-term view give the breathing space for superior returns.

Public markets may have been an ideal vehicle for passive, index-based investing in the past. However, the combination of the above two factors makes private markets investing an ideal choice for the active investor.

In addition to showing higher returns, private market investments have also shown more resilience during times of market stress.

Owing partly to the longer-term nature of the typical deals, and the fact that funds are tied up for longer, temporary market turmoil has less of an effect on valuations. This is not just a financial benefit - it is also less psychologically stressful for the investor.

The chart below demonstrates how endowments, that typically invest a larger amount (39%) in private markets, enjoy both improved performance 

 lower volatility in comparison to investors with lower allocations.

The chart above also prompts the question: why does the 60:40 portfolio - with no private markets exposure - remain a go-to option for so many individual investors?

Part of the reason is that, until recently, the 60:40 portfolio was held up as a ‘tried and true’ approach. This belief has been shaken by the past few years.

However, the additional and more important 

reason is that private markets investing has until now not been as accessible as investing in the public markets.

Endowment-type organizations are ideally placed to excel in the private markets space as they have the ability to hire specialist talent required to scrutinize and manage investments, as well as the time horizon needed to pursue longer-term growth agendas.

An individual investor, on the other hand, who is planning for retirement may have a longer-term time horizon but lack the resources and expertise to identify and execute private deals alone.

At The Family Office, we have adopted a structure similar to the ‘endowment’ model. Rather than funding a specific institution, however, we put our clients’ money to work in companies we have personally sourced from our network and vetted with our expert team.

We believe the high minimum investment thresholds for these funds—sometimes reaching millions of dollars—must be lowered to democratize access to these strategies.

As with any wave of growth, the coming private markets boom will have both casualties and beneficiaries, especially given the increased complexity of the investing process. With the right partner, however, you can expect to navigate the challenges effectively.

www.blackrock.com/corporate/literature/whitepaper/solving-the-private-markets-allocation-gap-insti.pdf

https://www.privateequityinternational.com/partners-group-private-markets-aum-to-hit-30trn-within-next-cycle/

https://www.bain.com/insights/private-equity-outlook-global-private-equity-report-2023/

https://tfoco.com/en/insights/articles/rethinking-investment-strategies-60-40-portfolio-evolution

Private Markets: Why and How

Why Are Private Markets a Smart Choice for Women?

While traditional investments like stocks and bonds dominate many discussions, private markets offer a broader spectrum of opportunities. These include private equity, private credit, and real estate, which have the potential to provide higher returns and more stability over the long term. Because private markets are less affected by the day-to-day fluctuations of public markets, they can offer a solid option for investors seeking to manage risk and build a resilient portfolio. 

Public markets are subject to higher volatility, while private market investments have historically exhibited robust performance. According to Bain & Company, private equity has averaged 14% annually over the past 25 years, compared to 7% from the MSCI World Index.

 Private markets offer numerous advantages that are particularly appealing to women investors, including:

 Private equity, real estate, and private credit provide exposure across various sectors, geographies, and asset classes. This diversification helps mitigate the risks associated with public market volatility.

 Private markets allow for strategies that align closely with individual financial goals, whether it's generating steady income, preparing for retirement, or creating long-term wealth. This personalized approach ensures that every aspect of the investment strategy is designed to match both short and long-term objectives.

 Private markets provide access to investment opportunities that are often unavailable in public markets. These include ventures in privately held companies or high-value real estate developments, offering potential for steady returns over time.

 This combination of personalization, diversification, and stability makes private market investments an attractive option for women looking to secure their financial future.

Exploring Private Market Investment Options

 Investing in Private markets is not a one-size-fits-all approach. It encompasses a variety of asset classes, each with its own risk profile and return potential. Here’s a closer look at some of the available options:

 - Private Equity: Involves investing in private companies, often through buyouts or venture capital. Private equity is ideal for those willing to invest over the long-term and potentially enjoy high returns.

 - Private Credit: Involves lending capital to private companies or projects in exchange for interest payments. It offers lower risk and regular income streams, making it suitable for conservative investors.

 - Real Estate: A tangible asset class that generates income through rental properties or property appreciation. It provides a steady cash flow while benefiting from market growth.

How The Family Office Helps Women Build Personalized Investment Strategies

 At The Family Office, we understand that women have diverse financial needs. Whether it’s creating a legacy, planning for life changes, or retiring with peace of mind, we build personalized strategies to support your unique goals.

 We take time to understand your financial priorities, whether it’s managing risk, generating income, or focusing on long-term growth.

 We build bespoke portfolios by blending private equity, real estate, and private credit to provide a balanced, diversified investment plan.

 Our platform enables you to track portfolio performance, invest in new opportunities, and manage liquidity through our Marketplace, all while staying updated with weekly market insights.

 Our team continuously monitors market conditions and adjusts your portfolio to ensure it remains aligned with your financial goals, providing expert guidance as needed.

The opportunities in private markets are vast, but they require a thoughtful approach. As more women seek to enhance their financial independence and legacy, understanding the full potential of private market investments becomes essential. With the right partner, such as The Family Office, women can gain access to a world of untapped wealth-building opportunities.

 Now is the time for women to explore private markets and unlock the potential for financial security and growth. Contact The Family Office today to begin your journey toward a brighter financial future.

Why Private Equity Is Targeting Individual Investors | Bain & Company

Unlocking Wealth Opportunities in Private Markets: A Guide for Women Investors

At 50 basis points, the size of the cut was notable. The last two instances of a cut greater than 25 basis points were the Covid pandemic of 2020

 and the Global Financial Crisis of 2008.

 While not signaling a crisis, the move does formalize a shift from fighting inflation to fighting a potential recession caused by an over-cooling labor market.

The cut signals the end of an era. That being the case, what can we expect in the new one? And specifically, what does it mean for investors in private markets?

, a high interest rate environment makes it harder to rely on a ‘rising tide lifts all boats’ investment strategy, fueled by cheap borrowing and ever-expanding multiples.

Investing outside the stock market into private deals, whether as an equity investor or as a private lender, has offered investors an alternative path up to now.

The Federal Reserve’s (the “Fed”) official projections suggest that rates could fall by a further 2% over the next few years.

 It’s reasonable to ask if this reversal of course takes the sheen off private markets investments. Let’s examine this hypothesis in more detail.

If capital becomes more widely available, companies will have more options to fund growth. This means that private markets investors will experience more competition for assets.

Equity investors will likely have to offer higher multiples to compete with other bidders, and hence risk either losing out on deals or overpaying for target companies. Debt investors, meanwhile, will need to settle for lower returns, not only as a result of the lower rate environment but also as traditional lenders re-enter the market offering more attractive rates.

To the extent that the Fed’s move indicates the potential for (though not yet the expectation of) a recession, sticking to traditional investing (i.e., public markets) may represent the most prudent course for the time being.

While the above arguments are correct to an extent, they represent a limited view of what private markets investing involves.

While it is true that more people can enter the private markets space if the cost of capital continues to decline, successful private markets investing relies on the judgment of the deal team rather than the wider economic market conditions.

For instance, there will be niches where traditional lenders lack confidence or experience, where private lenders can not only offer funding but also more tailored and flexible lending terms. The success of private equity investing, similarly, relies precisely on the ability to see through the hype and invest in firms and sectors less prone to bubbles and eventual collapse if, and when, a recession hits.

Public valuations are, according to various key measures, elevated in historical terms.

 Lower rates tend to boost or at least buoy valuations, but earnings growth is ultimately required to maintain them through broader economic woes. Private markets, by contrast, can offer investors lower valuations with stronger upside potential.

Investing exists in both ‘smart’ and ‘herd-like’ forms.

 While the latter requires a certain economic backdrop to success, the ‘smart’ form is able to flourish in almost all conditions.

On top of this, the principle of diversification remains even more relevant in times of greater uncertainty. Even if the outlook for public markets is bright, maintaining exposure to the (much larger) universe of private firms is an essential tool to guard against risk.

It is too soon to draw any firm conclusions about the long-term effects of US monetary policy on valuations, private or public, or how the dynamics of private markets investing will change as a result.

The key task for investors is to retain the ability to discern between ‘smart’ and ‘herd-like’ behavior, and if possible, find a team with the expertise, network, and track record to see them through the coming, yet unknown, environment.

The Rise of Private Debt: A New Era for Capital Markets and Portfolios

Wednesday, November 8, 2023

4:00 pm (GMT+3)

Language: English

Shahab Rashid discusses the rise of private debt, marking a new era for capital markets and portfolios, including:

Speaker

Shahab Rashid

Moderator

Naji Nehme, CFA

Register Now

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