The private market advantage your portfolio might be missing

Private market exposure is becoming increasingly essential for achieving long-term portfolio performance. According to Wilshire Indexes, the US stock market has lost over half its publicly listed companies since the 1990s. In this month's Reserve Letter, we examine how this concentration happened – and why it matters for your investment strategy.

The great migration to private markets

There has been a fundamental shift in how wealth gets created. Today, 87% of companies with revenues above $100 million are privately held. Companies are now staying private three times longer, with the median age at IPO tripling from 4 years to 12 years since 1999. As more businesses choose private capital over public markets, private equity market size is expected to nearly triple over the next decade.

The drivers are well-documented: public market volatility, short-term earnings pressure, and abundant private capital have made public listings less attractive for many companies. Meanwhile, private equity firms, sovereign wealth funds, and institutional investors have built out the infrastructure to support businesses through their entire lifecycles – reducing the need to go public for capital.

By the time promising companies reach public markets, much of their growth has already been captured. Access to private markets increasingly means access to entirely different return streams that operate on different cycles, respond to different factors, and offer fundamentally different risk-return profiles.

When public markets struggled, private markets delivered

2022 provided a clear example for why private market exposure matters. In one of the worst years for traditional portfolios in decades – with both stocks and bonds falling simultaneously – private markets demonstrated what diversification looks like in practice.

While the MSCI World fell 17.7% and bonds provided little refuge, the Hamilton Lane Global Private Assets Fund – a portfolio of 190+ high-performing private companies across different life stages and geographies – delivered positive returns of 8.3%.

In a year that was difficult for public markets, private equity created value with a focus on business fundamentals over market sentiment. This is what portfolio diversification looks like when it's working: not just spreading risk across different sectors, but accessing uncorrelated returns.

Fitting private markets into your portfolio

Understanding how private markets enhance your portfolio isn't simply about chasing higher returns – it's about accessing genuinely different return drivers that can perform when traditional assets struggle.

Consider the data: allocating 10% of a traditional 60/40 portfolio to private infrastructure investments would have increased returns by 5.3% while reducing volatility by 10.6% over the past decade.

Infrastructure offers distinct diversification benefits within private markets. These investments – toll roads, energy networks, data centres – generate predictable cash flows from the essential services that people and businesses use, making them particularly valuable during periods of economic uncertainty.

The same principle of diversification applies across private markets more broadly. Cambridge Associates' 2023 analysis of 1,572 US funds shows private equity delivered 13.1% average annual returns versus 8.6% for the S&P 500 over 25 years. Meanwhile, according to Federal Reserve analysis, private credit’s floating rate structure exhibits significantly lower duration risk than traditional bonds, via its ability to adjust during rate-hiking cycles.

Breaking down the barriers

The challenge with private markets has never been about their potential – it's been access. For decades, meaningful exposure required institutional-scale minimums, decade-long lock-ups, and operational complexity that made it impractical for all but the ultra-wealthy.

That's changing. Advances in fund structuring and the rise of semi-liquid vehicles have made private market investing more practical with regular liquidity options. Our private market suite, which feature low minimums, is designed to help you overcome these traditional barriers and tap into opportunities that are usually out of reach:

1. Semi-Liquid Private Equity: Multi-manager exposure to 190+ private companies across different life stages and geographies, targeting 10-12%* returns p.a. with monthly liquidity after 12 months.
2. Semi-Liquid Private Infrastructure: Multi-manager approach to essential assets like energy and transportation. Also targeting 10-12%* annual returns with monthly liquidity after 12 months.
3. Semi-Liquid Private Credit: Invest in senior secured loans to mid-market companies in a portfolio that’s managed by multiple experts, and diversified across sectors and geographies. This portfolio has delivered consistent 8-10%* returns, with monthly liquidity after 12 months.
4. Our PE/VC Portfolio: With a low minimum, access a curated selection of 5-7 funds investing in high-growth companies, across venture capital and private equity strategies, targeting 15-20% IRR over longer time horizons. Closed-end funds are structured to hold investments through full cycles without liquidity demands, supporting long-term strategies that can be complemented by the faster deployment and liquidity features of semi-liquid funds.
5. Our Angel Investing: Get direct exposure to Southeast Asia's dynamic startup ecosystem in collaboration with XA Network – from fintech innovators to emerging technology companies reshaping regional markets.

Private markets are a core component of how many investors build resilient, diversified portfolios – excluding them can mean missing out on sources of return and diversification that public markets alone can’t provide. From income generation to a focus on growth, private markets can help balance risk, smooth volatility, and expand your opportunity set.

* Target returns are not guaranteed. Past performance is not indicative of future results.