What are the most common types of private markets?

Private markets can provide an opportunity to diversify investment portfolios beyond traditional assets like stocks and bonds. Let's take a look at some of the asset classes that make up the private markets ecosystem.

One of the most popular private market offerings is real estate, which can be accessed in a number of ways that don't involve directly owning physical properties. Real estate investment trusts, also known as REITs, allow investors to pool their capital to invest in a diversified portfolio of income-generating real estate assets. REITs can be an attractive option for investors seeking both cashflow and capital appreciation.

Private equity refers to investments made in non-publicly traded businesses. Private equity firms pool funds from investors and acquire ownership stakes in a diversified portfolio of companies with the goal of fostering growth and ultimately realizing a return on their investments.

Traditionally, the exclusive domain of institutional investors, private equity investment opportunities are becoming more accessible for individual investors.

Private credit involves lending capital directly to borrowers that are not publicly traded. Investing in private credit may help provide a diversified source of income and the potential for attractive risk-adjusted returns.

Real assets are tangible physical assets with intrinsic value, such as natural resources and infrastructure. Owning real assets may make sense for some individual investors given their intrinsic value and their potential to act as a hedge against inflation. Commodities are the raw inputs that are consumed in the production of goods. Commodities include things that are mined or extracted, such as metals and petroleum and agricultural products like wheat, cotton, and sugar. Direct ownership of physical commodities may involve significant storage costs and logistical challenges. Individual investors can choose to access the asset class through exchange-traded products or futures markets.

In summary, private markets can offer a variety of exposures, each with unique benefits and challenges. Investing in private market offerings can help individual investors enhance the diversification potential of a traditional portfolio of stocks and bonds.