Private investments now occupy a greater portion of portfolios, partially the result of family offices signing up more ultra-high net worth clients with the promises of higher returns from opportunities not readily available to Main Street investors.
Paradoxically, that exclusivity creates its own problems as more people with the means but not necessarily the nerve or comprehension flock to them. Whether private equity, venture capital, debt or infrastructure, private assets are often opaque, illiquid and hard to understand except for the most sophisticated investors.
This resulted in buyers’ remorse. A November report by Capital Preferences estimates 30% of investors previously invested in private markets but later pulled out and chose not to re-enter. At the same time, the paper suggests investors are leaving money on the table: Current allocations to private investments are nearly $7 trillion belowwhere they should be.
So there’s a tremendous opportunity for advisors to realign private markets investments with clients’ needs. Concurrent with our announcement of the 2026 CIO 5: Top Wealth Management CIOs, we asked winners of last year’s CIO 5 to offer their views on how advisors and their clients should approach private markets.
Private Markets Can Be Attractive
Private markets hold an increasing amount of the nation’s wealth. For example, highly valued tech startups are opting to stay private for longer periods of time versus going public. CB Insights estimates there are 1,334 “unicorns” in the world today – private firms worth at least $1 billion. They hold a cumulative value of $5.4 trillion.
Also, a small number of publicly traded companies, such as Nvidia, Apple and Alphabet, are increasingly driving the overall gains of the stock market. Private assets may help investors diversify their portfolios.
Experts say private markets can offer the prospect of greater returns and diversification.
“Private markets has the potential to enhance portfolio performance by boosting returns, reducing risk, or both,” said Philip Straehl, CIO of the Americas for Morningstar Wealth. “However, not all private investments suit individuals’ portfolios.”
He continued, “Appropriateness depends on investor liquidity needs and current asset valuations among other factors. As such, careful selection ensures alignment with objectives while managing constraints and market conditions effectively.”
“The investment landscape has shifted,” according to Jen Wing, CIO and Head of Investment Solutions at GeoWealth. “Companies are staying private longer, moving some opportunity from public to private markets. US equities are now concentrated, and valuations are elevated compared to historical data. Advisors are looking for new sources of return, income, and diversification for client portfolios.”
Private Markets Offer Multiple Benefits
Investors seek various advantages from private markets, whether diversification from public equities, better returns or tax advantages.
“For some clients, private investment solutions can serve as a means of generating additional income through exposure to higher-yielding assets,” said Matt Dmytryszyn, CIO of Composition Wealth. “For others, they can be tax-efficient vehicles, such as a private real estate solution where distributions can have tax deferrals or lower tax treatment.”
Said Straehl: “Private market implementation in the wealth channel must align with portfolio and investor objectives. Conservative portfolios may require smaller allocations to maintain liquidity for withdrawals. Tailoring allocations across risk profiles ensures objectives and liquidity needs are met effectively.”
Private Markets Are Not For Everyone
Clients that need liquidity may find private assets, which tend to require longer investment horizons, impractical. They also may balk at the high fees and complex structures.
“The primary drawbacks of alternatives are liquidity and fees, often trading off with one another,” said Rick Wedell, CIO of RFG Advisory. “Advisors may underestimate how long capital can be tied up—often 10 years or more. Even more liquid products have limits, such as gates or early-withdrawal fees, making it critical to understand access constraints before investing.”
Dmytryszyn agrees.
“The obvious drawback is illiquidity. Clients may not know what their liquidity needs will be five or ten years from now, and their liquidity preferences can change. Private investments can also be more complex strategies, and we believe it’s important for clients to have a sound understanding of what they are investing in.”
Private Markets Need To Be Understood
Experts say advisors and clients require better preparation for private investments and CIOs play a large role in that.
“Client education is essential,” Wing said. “The CIO should provide clear guidance for RIAs including liquidity expectations, allocation amounts, and appropriate strategies for their clients’ goals. RIAs also need a simple onboarding playbook for many clients. Platforms can standardize sizing, liquidity management, and implementation at scale.”
Said Straehl: “Investor education is vital given the complexity of private markets. CIOs and investment teams must actively manage investor expectations and the role they play in their portfolios. Our research shows well-educated investors are more likely to stay committed to their investment strategy, increasing the likelihood of achieving long-term goals.”
Private Market Products Require Strong Due Diligence By CIOs
“CIOs should conduct thorough due diligence by evaluating the manager, strategy, track record, team, and underlying risks,” Wedell said. “Assess correlations, market competitiveness, and whether similar exposure exists in public markets.”
Wing said evaluating the investment manager is key.
“Manager selection is critical, especially in private markets, where performance dispersion is wide,” she said. “This is especially important today because many semi liquid vehicles are relatively new. Due diligence teams need to assess the investment team, its process, and a demonstrable track record across strategies and market environments.”
Thomas Lee, Senior Editor and Staff Writer at Wealth Solutions Report, can be reached at thomas.lee@wealthsolutionsreport.com.
