Essentials of Private Markets

Learn how assets such as private real estate, credit, and equity can fit into investment portfolios.

What are Private Markets?

Private markets can offer investors access to assets, opportunities
and strategies unavailable through public stocks and bonds.

Private equity funds invest in non-publicly traded companies, ranging from startups to large private enterprises.

Private credit funds issue corporate loans and other credit instruments that do not involve a traditional bank and are not publicly traded.

Private real estate funds invest directly in real estate properties ranging from warehouses to apartments.

Why Private Markets?

Private markets may provide attractive return opportunities, as well as more
portfolio diversification and lower volatility than publicly listed securities.1

allocating to private markets

Allocating to asset classes such as private equity, private real estate, and private credit can reshape the risks and returns of investment portfolios.

alternatives exposure

Individual investors are typically underallocated to alternatives, which includes private markets, compared to institutional investors.

allocating to private markets

Allocating to asset classes such as private equity, private real estate, and private credit can reshape the risks and returns of investment portfolios.

Private Markets: An Illustration
(2007-2022)

60/40 Portfolio

Annualized Return3.3%
Annualized Volatility12.4%
Current Yield2.9%

Portfolio with Private Market Allocations

Annualized Return5.4%
Annualized Volatility10.3%
Current Yield3.2%

Source: Bloomberg, Morningstar, as of 9/30/2022. As commonly used in the industry, the 60/40 portfolio is 60% allocated to the MSCI ACWI and 40% is allocated to the Bloomberg Global Aggregate Bond index. Private Credit is represented by the Cliffwater Direct Lending Index. Private Real Estate is represented by the NFI-ODCE Index. Private Equity is represented by the Cambridge Assoc. US Private Equity Index. There can be no assurance that any Blackstone fund or investment will achieve its objectives or avoid substantial losses, or that alternative investments will generate higher returns than other investments. Annualized returns and volatility are calculated based on the quarterly returns over the 15-year period from October 2007 to September 2022. The yield on the portfolio with a private market alternative allocation was calculated using the annualized MSCI ACWI Dividend Yield, the annualized Bloomberg Global Aggregate Bond Yield, annualized Cliffwater Direct Lending Index quarterly income, and the annualized NFI-ODCE quarterly income. There is no yield from the private equity allocation, so private equity did not contribute to the annualized yield calculation. The information herein is provided for educational purposes only and should not be construed as financial or investment advice, nor should any information in this document be relied on when making an investment decision. Opinions expressed reflect the current opinions of Blackstone as of the date hereof and are based on Blackstone’s opinions of the current market environment, which is subject to change. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of, future events or results.

alternatives exposure

Individual investors are typically underallocated to alternatives, which includes private markets, compared to institutional investors.

Alternatives Exposure

Source: Willis Towers Watson, “Global Pension Assets Study,” 2022; National Association of College and University Business Officers, “TIAA Study of Endowments,” 2021; Cerrulli, “U.S. Intermediary Distribution 2021,” 2021. For Endowments, the alternative asset allocation is for the Public College, University or System only and represented by allocations to Other equities (includes marketable alternatives, private equity and venture capital) and Real assets (includes TIPS, REITs, commodities / futures, publicly traded Master Limited Partnerships (MLPs), public traded natural resource equities, private energy and mining, and private agriculture and timber). Averages provided are dollar weighted. For Individuals, the alternative asset allocation includes “Alternatives” (e.g., long/short, market neutral, currency) and “Other” as defined as UITs, listed and unlisted closed-ended funds and private funds. Responses are weighted based on the average asset allocation of a moderate client.

To read the complete “Essentials of Private Markets,” please contact us.

Dig deeper into the fundamentals of
private market asset classes.

Private Equity

Driving fundamental improvements
in businesses over the long term.

Real Estate

Real estate has historically offered current income
to investors and may appreciate in value over time.

Credit

An attractive alternative investment
for investors looking for yield.

Secondaries

Once a niche, secondary private equity
has grown into an evolved asset class.

  1. There can be no assurance any alternative asset classes will achieve their objectives or avoid significant losses. Diversification is not a guarantee of either a return or protection against loss in declining markets.