Private markets have historically been more accessible to institutional and ultra-high net worth portfolios, with many of those investors having spent decades building familiarity, knowledge and infrastructure for investing in these asset classes. In particular, we highlight two investor types which, on average, hold large allocations to the private markets.
Family offices for the ultra-wealthy average 40% allocations to private markets, with the majority of their real assets exposure coming from private markets. Private credit is the smallest but quickest growing allocation among such investors.
Large ($1B+) endowments average 46% allocations to private markets, with the majority of their real assets exposure and nearly half their equity exposure coming from private markets. Private credit is the smallest but quickest growing allocation here as well.
It is also interesting to look at different-sized endowments regarding their private market investing behavior. Smaller endowments, historically with more limited access and fewer resources to pursue private market investing, tend to have smaller allocations. Interestingly, there is almost a linear relationship between size of the endowment, total allocation to private markets, and annualized returns.
10yr Returns for Endowments Categorized by AUM3
With private markets becoming increasingly accessible through different structures, including lower minimums, shorter lockups and greater liquidity, we believe that individual investors can benefit from having similar private markets allocations to family office and endowments, upwards of 50% of a portfolio depending on their financial objectives.