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5 key charts to building wealth in private markets
Over the past 30 years, public market regulations have made it progressively more difficult and expensive to operate as a publicly traded company. Meanwhile, rule changes in the private markets have allowed more investors into private investments.
We have observed the following:
- Companies have stayed private for longer — or have chosen not go public at all
- Private lenders have led the way in funding America’s mid-size companies — the heartbeat of the U.S. economy
While public markets can offer daily liquidity and must adhere to more stringent reporting requirements, data shows that the use of private markets investments, including private credit, private equity and private real assets, can enhance portfolios with potentially better returns for lower volatility relative to the public markets.
Here are 5 charts to set you on your journey.
#1 - Private markets have historically offered investors better risk-adjusted returns(1)
The power of private markets can be easily seen by looking at risk and return vs. public markets:
#2 Consistent outperformance in private equity has led to outsized returns(2)
Private equity, the most well-known subset of private markets, has delivered better upside with less realized volatility over the past 30 years.
Historical return of private equity vs. public equity
#3 - Private credit has consistently offered durable income at a premium(3)
#4 - Private market asset classes outperform public market equivalents consistently(4)
Investors have appreciated the historical consistency of private market returns over time and through cycles.
Annual returns of private vs. public asset classes ranked in order of performance (2005–2023)
#5 - Private markets can enhance a portfolio’s risk-adjusted return(5)
The beauty of private markets lies in their simplicity. They can create a smoother ride to wealth that so many clients seek. Whatever the road your clients are on, we believe the use of private markets can play a key role in attaining their financial goals.
Private market allocations should be chosen to align with client objectives
Building wealth with private markets
For many investors, long-term success requires expanding their portfolios beyond public markets to include private equity, private credit, private real estate and private infrastructure. At AWMS, we can serve as your guide to the private markets while making these important asset classes more accessible.
Learn more about Ares Wealth Management Solutions
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Mr. Benveniste is the Head of Australia for Ares Asia Wealth Management Solutions and acts as a client portfolio manager for Australian investors.
Prior to joining Ares Australia Management in January 2020, Mr Benveniste spent six and a half years at Macquarie Group most recently as the lead senior investment specialist for Macquarie fixed income in Australia, where he managed a team of investment and product specialists covering both retail and institutional investors. From 2006 to 2012, he was based in London working for Société Générale where he held trading, credit analyst and sales roles for loan syndications across Europe, the Middle East and Africa.
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1 Each data point represents an index. All data points use index returns Jun 2004 – Jun 2024 except for private credit which starts Oct 2004 (earliest available). Appraisal-based valuations may be subject to smoothing bias, in which case appraisal-based volatility may be understated. Private equity refers to Burgiss All Buyout Index. Private real estate refers to NFI-ODCE Index. Private credit refers to Cliffwater Direct Lending Index. Private Infrastructure refers to Burgiss All Infrastructure Index. Indexes are unmanaged and do not take into account fees or expenses. Past trends do not imply, predict or guarantee future results.
2 Source: Burgiss, Bloomberg, as of June 30th, 2024. This graph represents the growth of a hypothetical investment of $100,000. It assumes net
returns with reinvestment of dividends and capital gains, but does not reflect sales loads, redemption fees or the effects of taxes on any capital gains and/or distributions. Indexes are not available for direct investment. Past trends do not imply, predict or guarantee future results.
3 Private credit represented by Cliffwater Direct Lending Index (CDLI). High Yield represented by Bloomberg High Yield Bond Index. Leveraged Loans represented by Credit Suisse Leveraged Loan Index. Aggregate Bond represented by Bloomberg US Aggregate Bond Index. Dark blue highlights to the right show the best performing of the four indexes for a given year. All returns are gross total returns. Red lettering denotes negative returns for the year. Since inception is based on the latest common inception of all relative indices – Q3 2004 to Q4 2023. Indexes are unmanaged and do not take into account fees or expenses. Past performance does not guarantee future results.
4 Balanced Private Markets portfolio is 34% private equity, 26% private credit, 20% private real estate, and 20% private infrastructure. Past performance does not guarantee future results. Please see endnotes for more information.
5 All data Dec 2004 – Jun 2024. Analysis done in Venn by Two Sigma. Venn is a third-party portfolio construction tool utilized by AWMS. Private equity represented by Burgiss Buyout Index. Private credit represented by Cliffwater Direct Lending Index. Private real estate represented by NFI-ODCE Core. Private infrastructure represented by Burgiss All Infrastructure Index. Public equity represented by MSCI World. Public bonds represented by Bloomberg US Aggregate Bond Index. Indexes are unmanaged and do not take into account fees or expenses. Past performance does not guarantee future results.
ENDNOTES
Private equity refers to Burgiss All Buyout Index. Private real estate refers to NFI-ODCE Index.
Private credit refers to Cliffwater Direct Lending Index. Private infrastructure refers to Burgiss All Infrastructure Index.
Public Bonds refers to Bloomberg US Aggregate Bond Index.
Investment Grade Credit refers to Bloomberg US Corporate Total Return Index.
Leveraged Loans refers to Credit Suisse Leveraged Loan Index.
High Yield refers to Bloomberg Global High Yield Corporate Total Return Index.
Public Equity refers to MSCI World Index.
Public Infrastructure refers to S&P Global Infrastructure Index.
Public REITs refers to FTSE NAREIT All Equity REITs Total Return Index.
Indexes are not available for direct investment. Past trends do not imply, predict or guarantee future results.
This communication is for informational purposes only and is neither an offer to sell nor a solicitation to purchase any related securities. Investing in private markets investments involves a high degree of risk including, but not limited to, risk of substantial loss of principal. Direct investments in private companies and investments involve a high degree of business and financial risk that can result in substantial losses.
Investors must carefully consider the risks and other details in when making investment decisions. Private markets investing may not be for every investor and individuals should consult a professional investment advisor.
Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results an investor can expect to achieve. These materials may contain “forward-looking” information that is not purely historical in nature, and such information contained herein is based upon certain assumptions about future events or conditions and is intended only to illustrate hypothetical results under those assumptions (not all of which will be specified herein).
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Head of Australia, Ares Asia Wealth Management Solutions
Ares Wealth Management Solutions
Mr. Benveniste is the Head of Australia for Ares Asia Wealth Management Solutions and acts as a client portfolio manager for Australian investors. Prior to joining Ares Australia Management in January 2020, Mr Benveniste spent six and a half...
Head of Australia, Ares Asia Wealth Management Solutions
Ares Wealth Management Solutions
Mr. Benveniste is the Head of Australia for Ares Asia Wealth Management Solutions and acts as a client portfolio manager for Australian investors. Prior to joining Ares Australia Management in January 2020, Mr Benveniste spent six and a half...
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