As private markets capture growing attention among high-net-worth and mass-affluent investors, advisors are increasingly fielding questions about whether clients are missing out.
But Kaitlin Hendrix, asset allocation research director and vice president at Dimensional Fund Advisors, told InvestmentNews that much of the enthusiasm is driven by perception rather than portfolio reality.
Drawing on research and analysis, she argues that investors already have meaningful exposure to private markets, often without realizing it, and that the trade-offs of direct private investing deserve closer scrutiny.
Why has interest intensified despite the higher costs and complexity?
“Private market investments are often positioned as unique opportunities in something special or exclusive,” Hendrix says. “And folks are naturally allured by new products that claim to offer higher returns than what they can find on public markets. They just need to understand the trade-offs involved, which include very wide ranges of outcomes, higher costs, and complexity.”
The promise of exclusivity and outperformance can be powerful. But Hendrix stresses that investors must weigh that promise against real-world constraints: illiquidity, opaque valuations, minimum commitments, and wide dispersion in outcomes.
From an asset allocation perspective, Hendrix notes that many investors already hold indirect stakes in private companies through their public equity portfolios.
“Finding a precise answer is nearly impossible, but information from public companies’ accounting statements indicates that out of $25 trillion invested in the 20 largest US stocks, investors get about $100–$150 billion in exposure to private investments,” she explains. “This means investors get meaningful ownership stakes to some well-known companies. For instance, Amazon, Alphabet, Microsoft and NVIDIA have ownerships stakes in Anthropic.”
Hendrix points to corporate venture capital and subsidiary structures as additional channels. For example, Alphabet launched GV (formerly Google Ventures) as a venture firm with a single limited partner: Alphabet itself. As of December 31, 2024, Alphabet ranked as the fourth-largest publicly traded US stock. By owning Alphabet, investors indirectly participate in GV’s portfolio, which includes companies such as Stripe.
She adds that subsidiary investments provide another layer of exposure. In 2024, Alphabet invested $350 million in Flipkart through its wholly owned subsidiary Shoreline International Holdings. Even though Shoreline is a holding company that does not operate Google products or services, investors in Alphabet still gain indirect exposure.
“As to why this often goes overlooked, there’s no easy way to access the data,” Hendrix says. “To come up with these figures, we examined the latest 10-Ks of the 20 largest companies as of Dec. 31, 2024. Advisors and investors have better uses of their time.”
When clients equate private markets with innovation and growth, Hendrix urges advisors to ground the conversation in historical evidence.
“It’s important to remind end investors that they can have a great investing experience through public markets,” she says. “Over the past 100 years, for instance, the stock market has delivered about a 10% annualized compounded return. Public markets are transparent and liquid, while trading costs are low.”
Moreover, she adds, “advisors can use this information to let their clients know that they’re not missing out. They have some exposure through investments in public markets.”
In other words, innovation does not require exclusive access to private funds. Public investors often participate in that upside through diversified holdings.
Even when private markets are accessible, the structure of those investments matters.
“When it comes to any investment, it’s critical to consider not only the investment proposition but also the implementation and investment vehicle,” Hendrix says. “The proliferation of private market products has given a broader set of investors access to the asset class through various vehicles. Still, private investing is inherently associated with special fund structures, minimum capital commitments, illiquidity, and relatively high fees that can negatively impact investor experience. Like other alternatives, private funds are not for everyone.”
Those structural elements including fees, lockups, capital calls, and legal complexity, can materially shape outcomes, particularly for clients accustomed to the liquidity and transparency of public markets.
High profile examples help illustrate the point. Public companies frequently make sizable private investments, offering indirect access to emerging firms.
“It shows that even with a diversified, low-cost portfolio of public stocks, investors can benefit if some private companies ultimately succeed,” Hendrix says. “This is helpful because it’s extremely difficult to know which private companies, or funds, will ultimately deliver higher returns. And investors get that exposure without having to jump through all the hoops, and deal with all the related costs, of investing in private markets.”
The message: investors may already be participating in private-market upside, without the added friction.
In 2024, Dimensional released research analyzing 6,000 private funds across buyout, venture, credit, and real estate strategies between 1980 and 2022.
“A lot of people think about private markets as delivering higher returns than public markets,” Hendrix says. “But we found that the wide dispersion in lifetime performance suggests outcomes may be highly fund dependent, with clear upside potential but also substantial downside risk.”
She adds: “Second, while private funds have on average performed in line with listed style investments, the latter are often available in broadly diversified, low-cost, liquid options.”
Diversification is often cited as another motivation. Hendrix acknowledges some merit, but with caveats.
“Our findings are generally supportive of diversification benefits of private markets overall; however investors cannot generally invest in an entire private market asset class like they can in public markets,” she says. “Investors should take caution that investing in just one or two private market funds may not provide the same level of diversification.”
She also notes evolving correlations: “Nonetheless, we do find greater correlations in more recent decades which suggests public investors should temper their expectations around such benefits, especially if we continue to see more transparent and comparable valuation techniques.”
Ultimately, Hendrix encourages advisors to shift the conversation away from access and toward objectives.
“Focusing on the goal is always helpful. What’s the point of saving and investing for decades? To enjoy a financially secure retirement and meet other financial goals,” she says. “You don’t need to access private markets directly to do that. With a diversified portfolio, you have 100 years of data to inform your expected returns. You’re able to plan for the future. You can’t say the same thing about private markets.”
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