For much of the last century, public equity markets served as the default lens on the economy. That lens has narrowed. The number of U.S. public companies has declined meaningfully from its late-1990s peak, while a growing share of business value forms and matures in private hands. Many companies now stay private longer, and some of the economy’s faster-growing enterprises may not appear in a public index at all. For families building portfolios meant to last generations, this shift raises a practical question: how much of the real economy does a portfolio limited to public markets actually capture? That question is leading many families and family offices to examine what a deliberate private markets allocation can look like in practice.
Why a Larger Share of the Economy Now Sits in Private Markets
The phrase “private majority” describes a simple observation: a large and growing portion of economic activity, company formation, and value creation now occurs outside public exchanges. Private equity, private credit, real assets, and venture capital, the core of what many investors group under alternative investments, have expanded from niche strategies into central components of many institutional portfolios. Endowments, pensions, and family offices have, over time, directed meaningful capital toward these areas in pursuit of return potential and diversification that public markets may not fully provide.
Families considering this path tend to weigh several attributes:
- Access to companies before they go public, or that stay private. Private markets can offer exposure to enterprises during earlier, faster-growth phases.
- Potential diversification. Private assets may behave differently from public indices, although correlations are imperfect and reported valuations can lag public marks.
- A historically observed illiquidity premium. Some research has found that private investments, over certain periods, may have the potential to provide returns while also offering reduced liquidity. This premium is not promised, and outcomes vary widely by manager and vintage.
Private Market Fund Structures: Drawdown, Evergreen, Secondaries, and Co-Investments
How a family accesses private markets can shape the experience as much as the decision to participate. Several structures are common.
Traditional drawdown funds
Drawdown funds call capital over time and return it as investments are realized, often across a ten-year-plus life. They can offer access to institutional managers, paired with capital-call planning and a multi-year commitment.
Evergreen and interval funds
Evergreen and interval funds offer periodic liquidity and simpler mechanics, which some families find more practical, in exchange for different liquidity and structural features that merit careful review.
Secondaries and co-investments
Secondaries and co-investments can shorten the capital deployment curve or reduce fee layers, while introducing their own diligence requirements.
Risks of Private Market Investing: Illiquidity, Dispersion, and the J-Curve
Private markets carry features that differ from public portfolios, and candor about them is part of a fiduciary relationship.
- Illiquidity. Capital may be committed for years. Planning around spending, taxes, and other commitments becomes central.
- Dispersion. The gap between strong and weak managers in private markets has historically been wide, wider than in many public categories. Manager selection and access carry real weight.
- Capital calls and the J-curve. Returns in drawdown structures often arrive later in a fund’s life, after fees and early investments weigh on initial figures.
- Valuation and transparency. Private holdings are marked less frequently, which can understate volatility and complicate reporting.
- Fees and complexity. Layered fee structures and added administrative and tax complexity call for clear-eyed evaluation.
Portfolio Construction: Sizing and Pacing a Private Markets Allocation
For families, the question is rarely whether private markets are good or bad in the abstract. It is how a specific allocation fits a particular balance sheet, liquidity profile, time horizon, and set of goals. Sizing, pacing across vintage years, and integration with the broader portfolio tend to matter more than any single fund decision. Approached with discipline and diligence, an allocation to private markets can broaden a family’s participation in the economy. Approached casually, it can introduce risk and illiquidity a household may not have intended to hold.
The aim is not to chase a category. It is to decide, deliberately, how much of the private majority belongs in a plan built to endure.
Frequently Asked Questions About Private Markets Allocations
What does “the private majority” mean?
The term describes the observation that a growing share of economic activity, company formation, and value creation now occurs outside public exchanges, across private equity, private credit, real assets, and venture capital.
What is the illiquidity premium in private markets?
The illiquidity premium refers to a historically observed tendency for some private investments, over certain periods, to compensate investors for holding assets that cannot be readily sold. It is not promised, and results have varied widely by manager, strategy, and vintage year.
How do drawdown funds differ from evergreen funds?
Drawdown funds call committed capital over time and return it as investments are realized, often across a decade or longer. Evergreen and interval funds accept capital on an ongoing basis and offer periodic liquidity windows, in exchange for structural features that merit careful review before investing.
How do families typically size a private markets allocation?
There is no universal figure. Appropriate sizing depends on a family’s liquidity needs, spending plans, tax picture, time horizon, and existing balance sheet. Many families pace commitments across multiple vintage years rather than deploying capital all at once, and they revisit sizing as circumstances change.
This material is provided by Certuity, LLC for educational and informational purposes. It does not constitute investment, legal, accounting, or tax advice, nor a recommendation to buy, sell, or hold any security or to adopt any strategy. Investments in private markets involve heightened risks, including illiquidity, limited transparency, and the potential loss of principal, and are not appropriate for every investor. The strategies described depend on individual facts and circumstances. Certuity, LLC is a registered investment adviser; registration does not imply a certain level of skill or training. Past performance is not indicative of future results. Please consult your own tax, legal, and financial professionals regarding your specific situation.