The Private Markets Imperative: Why Individual Investors Can No Longer Ignore Private Equity and Private Credit

For decades, private markets were the exclusive domain of billionaires and institutional investors. If you weren't managing at least $100 million, you didn't get access to private equity deals, private credit opportunities, or direct investments in privately-held companies. The barriers were simple: minimum investments of $500,000 to $5 million, lockup periods of 7-10 years, and fee structures that only made sense for ultra-high-net-worth individuals.

That world is changing rapidly, and our opinion is that individual investors who remain entirely in public markets are systematically disadvantaging themselves. Private markets have become too important, too accessible, and too return-generative to ignore.

Why Private Markets Matter Now

Let's start with a fundamental observation: the investment landscape has fundamentally shifted over the past 15 years, and most investors haven't adjusted their strategies accordingly.

In 2010, private markets (private equity, venture capital, private credit) represented roughly 15% of global capital markets. Today, they represent over 35%. That's not a small niche. That's the mainstream of capital allocation.

More importantly, the performance differential has widened dramatically. Over the past decade, large-cap U.S. equities (the S&P 500) returned roughly 11-12% annually. Private equity—even after fees and lockups—returned 14-16% annually. Private credit returned 7-9% annually. Venture capital returned 18%+ annually (albeit with higher volatility and greater failure rates).

These aren't marginal differences. Over a 20-year investment horizon, a 3-4% annual outperformance compounds to massive wealth differences. $1 million invested in the S&P 500 at 12% annually becomes $9.6 million. That same $1 million in private equity at 15% becomes $16.4 million.

That's not luck. That's structural.

Why Private Markets Outperform

The reasons are straightforward and worth understanding:

First: Information advantage. Private equity firms and private credit managers have access to detailed operating information, management meetings, and strategic control over portfolio companies. They're not reading quarterly earnings reports like public market investors. They're sitting on boards. They're making operational decisions. That information advantage translates directly into better investment outcomes.

Second: Operational leverage. When a private equity firm buys a company, they don't just hold it and wait for the stock price to rise. They restructure operations, improve management, optimize capital structure, and drive revenue growth. They're not passive investors. They're active operators. That operational improvement generates returns independent of market sentiment.

Third: Longer time horizon. Public market investors are obsessed with quarterly results. Stock prices move based on earnings surprises, guidance changes, and sentiment shifts. Private equity investors have 7-10 year holding periods. That long horizon allows them to make strategic decisions that wouldn't make sense in public markets. They can invest in long-term capability building, acquire complementary businesses, or weather short-term earnings disruptions without panic.

Fourth: Structural tailwinds. Over the past 20 years, there has been a secular trend toward deleveraging in public markets and re-leveraging in private markets. Public companies have been pressured to reduce debt and improve balance sheets. Meanwhile, private equity firms have become skilled at accessing capital to lever returns. That structural difference has created consistent outperformance.

Fifth: Valuation Lags. Public markets are extraordinarily efficient. Thousands of analysts, billions of dollars in algorithmic trading, and constant price discovery mean stocks are rarely dramatically mispriced. Fewer investors, less transparency, and longer decision cycles mean pricing doesn't necessarily reflect long term value. That lag creates opportunities for skilled managers and investors.

The Shift From Public to Private

Here's what's critical to understand: this shift from public to private isn't temporary. It's structural and irreversible.

Companies are staying private longer. In 1980, the average company went public at roughly age 5. Today, it's age 10+. Why? Because private capital is abundant, and staying private allows founders to maintain control and avoid quarterly earnings pressure. Companies like SpaceX, Stripe, OpenAI, and countless others have remained private for decades while creating extraordinary value.

Meanwhile, public markets have become increasingly dominated by a handful of mega-cap technology stocks. The S&P 500 concentration in the "Magnificent 7" (Apple, Microsoft, Google, Amazon, Tesla, Nvidia, Meta) has reached levels not seen since the dot-com bubble. That concentration increases risk for 'diversified' portfolios.

The implication is clear: to achieve genuine diversification and capture the full spectrum of investment returns, you need exposure to private markets.

The Practical Barriers (And How They're Being Removed)

Historically, individual investors faced significant obstacles to accessing private markets, but the investment world has fundamentally adapted to remove these constraints. Capital requirements that once excluded all but the wealthiest have been dismantled through innovative fund structures. What once required a $5 million minimum now opens doors to most retail investors.

Liquidity, another traditional obstacle, has been resolved through the emergence of secondary markets for private assets. You can now sell private assets before the traditional fund lifecycle ends. Platforms facilitate these sales. You're no longer locked in for 10 years with zero flexibility. This fundamental shift has made private markets accessible not just in theory but in practice.

Complexity and due diligence—the third barrier—have been addressed through professionally managed products. Instead of evaluating individual private fund managers yourself, you can invest in "funds of funds" or interval funds that handle that selection process. The expertise is professionalized and distributed. You benefit from institutional-grade manager selection without needing to become a private markets expert yourself.

These three structural changes have transformed private markets from an exclusive club into a genuine asset class available to everyday investors.

The Practical Implementation

Start simple. Begin by assessing how much capital you can deploy for 5-7 years without needing access. This determines your ceiling for private market allocation.

Fund-of-funds structures offer professional selection of private equity and venture managers with lower minimums and reduced due diligence burden. Your capital is diversified across multiple managers and strategies, which is sensible for most individual investors entering private markets for the first time.

Interval funds provide professionally-managed portfolios trading on secondary markets. These offer more liquidity than traditional private funds—you can typically redeem quarterly—while still capturing private market return potential.

For investors with slightly higher tax-brackets, direct fund investments in specific private equity or credit managers become viable. This approach potentially offers lower fees and greater control over portfolio construction.

Regardless of which vehicle you choose, dollar-cost average your entry. Don't deploy all capital at once. Invest over 12-24 months. This reduces timing risk and smooths entry valuations. Then diversify across multiple strategies—don't put all capital in venture. Mix venture, private equity, private credit, and infrastructure. Different strategies perform differently in different economic environments.

The Risk Conversation

We won't pretend private markets are risk-free. They carry real risks that deserve honest acknowledgment. Your capital is usually committed for years unless the fund offers liquidity options. If you need cash, you could face discounts to exit. You're dependent on the skill of fund managers - bad managers can underperform. Early-stage venture investments can result in total loss if companies fail.

These risks are real. But for investors with adequate, diverse capital allocation, a longer time horizon, and credibility checks when selecting a manager, the return potential justifies the risk.

The Timing Argument

Here's what makes right now particularly compelling: we're at a turning point.

Private equity dry powder (committed capital waiting to be deployed) reached $2.7 trillion at the end of 2024—an all-time high. Private credit volumes are growing 15%+ annually. The infrastructure pipeline is expanding due to government spending on roads, bridges, and broadband.

Meanwhile, public market valuations have reached levels where incremental return potential is limited. Private markets offer better risk-adjusted return potential.

You want to be positioning toward this shift now, before it becomes obvious to everyone else.

The Bottom Line

The world is changing rapidly. The best investment opportunities increasingly exist in private markets. The barriers to access have declined dramatically. The structural return advantage is evident.

Individual investors who remain entirely in public markets are accepting potentially lower returns for the sake of liquidity they may not need.

That doesn't mean abandoning public markets. It means building a portfolio that reflects where capital is actually creating value. For most investors with long time horizons, that means increased allocation to private markets.

The question isn't whether to allocate to private markets. It's when. And the answer is: sooner rather than later.