🧠 Private equity and alternative investments: Are they worth it?

☕ Good morning!

If you’ve already maxed your 401(k)s, squeezed every basis point from index funds, and harvested every ounce of diversification traditional markets offer, this one is for you. 

You’ve entered the portfolio frontier where new money is less about safety, but smart, calculated risks, which usually brings you to private markets and alternative investments.

Here’s the gist: private markets promise returns, low correlation, and exclusivity, but also come with a few considerations, like illiquidity and accredited investor requirements. 

The requirement to be an accredited investor, which is the bare minimum for access to most PE funds, is $1 million+ in net worth, not counting your primary residence, OR annual income exceeding $200,000 (or $300,000 combined with a spouse.) 

Today, we’re going over whether or not PE and alternative investments are worth considering for you. 

The Performance Premium: What the Numbers Say

The strongest case for private equity and its alt cousins (private credit, real estate, infrastructure) rests on performance. 

Over the nine-year period ending September 30, 2024, private credit delivered an average annualized return of 9.8%, compared to just 3.1% for U.S. bonds and 6.5% for high-yield bonds. 

(Source: BlackRock “Student of the Private Markets” Q1 2025 report, p. 5)

It wasn’t just returns. Private credit had zero negative quarters from Q2 2022 through Q3 2024, while public bonds posted five. That’s structural insulation. 

Private equity shows a similar edge. Over the 10-year period through Q3 2023, it generated a net return of 13%, beating every major public index, including large-cap U.S. equities and mid-cap stocks. 

(KKR “5 Things for Wealth” report, p. 2, Exhibit 2)

When you zoom out even further, the cumulative edge becomes impossible to ignore. A well-constructed private portfolio (with equity, credit, real estate, and infrastructure) compounds, which is precisely what you want from long-term capital.

It also safeguards you from one of the biggest threats to this compounding– you. 

🔒 Illiquidity is a behavioral firewall

One of private equity’s most compelling value propositions is actually a constraint. Multiple studies signal that enforced illiquidity protects you from yourself. No ticker. No bailout. Just time-stamped endurance.

Why? Because impulse kills compounding. This isn’t about “diversifying,” but about building a portfolio that performs even when you're distracted, emotional, or gone. 

The theory is seductive. Tie up money for 10 years, collect an illiquidity premium over the public, ride off into the sunset. 

🏪 Public markets are shrinking

Public markets are no longer the whole pie. The number of public companies in the U.S. has dropped by over 30% since the early 2000s. Meanwhile, there are nearly 270,000 private companies with over 50 employees, compared to fewer than 5,000 public ones. 

(Source: KKR “5 Things for Wealth,” p. 3, Exhibit 4)

Sure, the world has changed significantly in the ~2.5 years since December 2022, and it will continue to do so, but the pattern has hardly shifted. 

The point is that if you’re not investing in private markets, you’re missing out on the vast majority of today’s growth engine. And it’s not just startups anymore, private equity now owns a growing share of mature, cash-flowing businesses that would’ve IPO’d a decade ago.

🎥 Want to Go a Bit Deeper?

I unpack some of these topics in our Private Equity & Alternatives YouTube Short—what they are, why they matter, and how we’re actually using them in client portfolios.

🧱 Barriers are falling. 

Ten years ago, you basically needed $5M and an Ivy League endowment on speed dial to get into a quality PE fund. Today? Not so much.

Investor-friendly structures, like perpetual-life funds with monthly liquidity, 1099 tax reporting (instead of K-1s), and lower minimums (as low as $25K), bring institutional-grade alts to accredited and even some mass-affluent investors. 

(Source: Ares “Private Market Insights” 2023)

This shift is both regulatory and operational. Tech has streamlined everything from onboarding to capital deployment. Electronic sub-docs, rolling capital calls, and automated allocation models make it easier than ever for individuals to access real alternatives without the mess.

That said, don’t confuse ease of access with simplicity. These assets still require vetting, timeline management, and education. 

But the walls are coming down, and the gatekeepers are loosening up.

Making Sense of PE and Alternative Investments

You’ve probably heard it before: past performance is no guarantee of future results.

But the inverse is also true, past inertia guarantees nothing either.

The private market revolution isn’t some temporary trend. It’s a structural shift in where value is created, how capital flows, and what opportunity looks like. The only question left is: do you want in?

Because waiting for the public markets to catch up might leave you watching from the sidelines—while the real compounding happens elsewhere.

So, are they worth it?

Here’s a quick summary:

✅ Yes, if you’re a long-term investor with excess capital, stable income, a tolerance for complexity, looking to reduce correlation to stocks and bonds with participation in the “real” economy, where 95% of businesses live today.

❌But no, they’re not for everyone. If you might need the cash in three years for a house, or if you’re already mentally overloaded, alternatives can feel like a burden. Illiquidity cuts both ways, and access to top-tier funds still hinges on network and diligence.

We work with a lot of investors who are looking for innovative ways to diversify beyond the traditional 60/40, and whether it’s private equity or alternatives, we’re one of the few registered investment advisors positioned to offer both in a well-balanced, inflation-aware portfolio.

If you want to dive deeper into how we’re positioning portfolios amidst the current market turbulence, join our live session this afternoon. Or register to get the replay.  

Private markets hold asymmetric potential, but they’re not a brute-force allocation win. Your portfolio still needs to account for fees, capital timing, and access quality. 

This isn’t your “try it and see” game. Once you’re in, you’re locked in, often for 7–10 years. So even a small allocation requires real conviction and a plan.

Stay savvy, stay proactive, and keep your financial future bright.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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