While private equity is the most recognized private markets investment category, it is only one strategy of several that comprise the broader industry. Private investments also include private credit, infrastructure, and real estate, to name a few.
20 Years Ago
Today
Source: Hamilton Lane Data (February 2023)
Note: Each circle represents a manager and is categorized by strategy as defined by Hamilton Lane
Private Markets Industry
At the most basic level, private investments are assets or financial instruments that are not listed on a public exchange. They are investments made directly into private companies and are utilized to increase the value of the company by making operational or strategic improvements, supporting growth initiatives, enhancing management teams, improving technology, and more.
Since private investments don’t trade publicly, there is generally less readily available financial information about them. These investments are also less liquid than a stock bought and sold on a major exchange, or a corporate bond that trades over the counter. The limited liquidity and transparency in private markets are two of the biggest differences from public markets and are factors an investor should be aware of before allocating to the asset class. The industry has made strides in solving for liquidity and transparency, which we will dive into later.
The private markets industry has experienced tremendous growth over the last couple of decades, as this chart shows. What does this mean for investors? More investment opportunities, manager selection, and improved access.
Private market investing is an expansive universe that includes many investment types. This table provides a definition of several of the most common investment strategies and their corresponding characteristics.
Source: Hamilton Lane
Cost Effective
Enhanced Returns
Targeted Exposure
Investments made directly in a company or asset alongside a general partner. These investments are minority, passive positions made on the same terms as the GP.
Direct Investments
J-Curve Mitigation
Discount Valuations
No Blind Pool
Investments in existing portfolios or direct investments often purchased at a discount based on remaining fund life and quality of assets.
Secondaries
Current Income
Downside Protection
Shorter Duration
Participation in the debt financing of a company, usually as part of a change of control transaction. These loans can range in terms of seniority within the capital structure (who gets paid first) and interest rate.
Credit
Inflation Protection
Yield-Generating
Low Correlation
Investments in physical assets (e.g., building, pipeline, timber) that are long-term in nature. Investment strategies include Real Estate, Infrastructure and Natural Resources.
Real Assets
Highest Potential Return
Higher Risk
Long Term
Investments in startup and early stage, often technology-based companies; investments in relatively mature companies looking for growth over the long term.
Venture/Growth Equity
Equity investments in which a company is acquired, typically with the use of financial leverage. These companies are mature and generate operating cash flows.
Core of Private Equity Portfolio
High Return Potential
Experienced Managers
Buyout (Small, Mid, Large, Mega)
Features
Description
Strategy
Disclosures
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Why should investors consider private markets in their portfolio? >>
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Disclosures
Source: Hamilton Lane
Cost Effective
Enhanced Returns
Targeted Exposure
Investments made directly in a company or asset alongside a general partner. These investments are minority, passive positions made on the same terms as the GP.
Direct Investments
J-Curve Mitigation
Discount Valuations
No Blind Pool
Investments in existing portfolios or direct investments often purchased at a discount based on remaining fund life and quality of assets.
Secondaries
Inflation Protection
Yield-Generating
Low Correlation
Investments in physical assets (e.g., building, pipeline, timber) that are long-term in nature. Investment strategies include Real Estate, Infrastructure and Natural Resources.
Real Assets
Current Income
Downside Protection
Shorter Duration
Participation in the debt financing of a company, usually as part of a change of control transaction. These loans can range in terms of seniority within the capital structure (who gets paid first) and interest rate.
Credit
Highest Potential Return
Higher Risk
Long Term
Investments in startup and early stage, often technology-based companies; investments in relatively mature companies looking for growth over the long term.
Venture/Growth Equity
Equity investments in which a company is acquired, typically with the use of financial leverage. These companies are mature and generate operating cash flows.
Core of Private Equity Portfolio
High Return Potential
Experienced Managers
Buyout (Small, Mid, Large, Mega)
Private market investing is an expansive universe that includes many investment types. This table provides a definition of several of the most common investment strategies and their corresponding characteristics.
Source: Bison Data via Cobalt (November 2021)
Note: Each circle represents a manager and is categorized by strategy as defined by Hamilton Lane.
20 Years Ago
Today
Private Markets Industry
At the most basic level, private investments are assets or financial instruments that are not listed on a public exchange. They are investments made directly into private companies and are utilized to increase the value of the company by making operational or strategic improvements, supporting growth initiatives, enhancing management teams, improving technology, and more.
Since private investments don’t trade publicly, there is generally less readily available financial information about them. These investments are also less liquid than a stock bought and sold on a major exchange, or a corporate bond that trades over the counter. The limited liquidity and transparency in private markets are two of the biggest differences from public markets and are factors an investor should be aware of before allocating to the asset class. The industry has made strides in solving for liquidity and transparency, which we will dive into later.
The private markets industry has experienced tremendous growth over the last couple of decades, as this chart shows. What does this mean for investors? More investment opportunities, manager selection, and improved access.
While private equity is the most recognized private markets investment category, it is only one strategy of several that comprise the broader industry. Private investments also include private credit, infrastructure, and real estate, to name a few.
2
Why should investors consider private markets in their portfolio? >>