Mounting fears over escalating global tariff conflicts have roiled financial markets, with equities enduring a significant selloff in the past few weeks and fixed income markets pricing in heightened recession risks.
Investors are reassessing how to allocate capital. Private market investments — such as private debt, private equity and real assets — are emerging as an increasingly attractive solution.
In his 2025 annual letter to investors, BlackRock chairman Larry Fink wrote: “The beauty of investing in private markets isn’t about owning a particular bridge, tunnel or mid-sized company. It’s how these assets complement your stocks and bonds — diversification.”
Fink’s note highlighted three firms in the private-market space that BlackRock has acquired in recent months.
Alternative assets data provider Preqin has forecast that global private credit markets will reach $2.8 trillion in assets under management by 2028. While Canada trails behind the U.S., the trend is clear.
What are the risks?
With stocks and bonds not delivering like they used to, more investors are looking to private markets to fill the gap. But these investments come with their own challenges — liquidity, for example.
Unlike public markets, where you can buy and sell more easily, private investments often require locking up your money for years. That’s why it’s important for advisors to make sure these investments fit their clients’ needs and timelines.
Liquidity isn’t just about one fund — it’s about the whole portfolio. A smart advisor can make a real difference by helping clients build a mix of investments that keeps their money working while still giving them access to it when needed.
A well-constructed portfolio might include a core allocation to highly liquid assets like large cap publicly traded equities and government bonds, which can be sold quickly with minimal impact on price. Layered on top of that could be semi-liquid investments such as mutual funds or ETFs that offer daily or weekly liquidity. Then, depending on the client’s risk tolerance and investment horizon, an advisor might allocate a smaller portion to less liquid alternatives like private credit, private equity or real estate.
The key is balance: ensuring that enough of the portfolio remains liquid to cover short-term needs, unexpected expenses or market opportunities, while still capturing the potential benefits of longer-term, illiquid assets. This approach helps mitigate liquidity risk without sacrificing growth.
Private markets don’t have the same transparency as their public counterparts. There’s less regulation, less information readily available and a lot more complexity. Not all private investments are created equal — some carry more risk, while others offer greater flexibility or better returns.
Public companies generally have more robust governance structures, including requirements for independent directors and adherence to regulatory standards. Also, they must provide regular, detailed disclosures — such as quarterly financial statements and press releases for material events — ensuring higher transparency compared to private companies.
Private credit funds are typically known for lending to private companies, but some also extend credit to publicly listed firms, using their expertise to structure loans much like banks do. This approach raises important considerations about governance, transparency, liquidity and suitability. Lending to public companies can offer stronger oversight and disclosure, which may help reduce certain risks for investors.
It’s up to investors to do the legwork. Dig into the details to understand the investment, the fund manager and the risks involved. At the end of the day, private markets offer opportunities, but they require a thoughtful, hands-on approach.
Why private markets?
Fink is a proponent of the 50% equity/30% fixed income/20% private markets model. Depending on your client’s risk tolerance, the alternative allocation can range from 20 – 30%.
The shift we’re seeing is part of a broader movement away from traditional portfolios and toward alternative assets. It’s no longer enough to rely on public equities and fixed income alone. Alternative investments can enhance portfolio diversification by providing relatively low-correlation returns. This diversification reduces overall portfolio volatility and offers protection during market downturns.
In a world where markets are unpredictable, private debt in particular can offer stability. With shorter durations and senior-secured positions that help manage risk, it’s designed for the current climate. It delivers steady income and acts as a buffer against volatility. Some funds distribute earnings, effectively paying investors to wait during times of uncertainty.
Principal protection can be had via a senior-secured structure. And some alternative products —particularly those connected to regulated markets such as stock exchanges — provide greater transparency for investors.
Building private markets into a portfolio
The companies that make up the S&P 500 generate about 40% of their revenue outside of the U.S. Given the current uncertainty related to international trade, it is important to diversify beyond equities.
Fixed income is no safe haven, either. Bond yields are vulnerable to interest rate cuts, inflation may erode the purchasing power of fixed payments and global uncertainty can lead to market swings that affect bond prices.
Meanwhile, alternative investments like private equity, debt or real estate can yield income, diversification and inflation protection.
KYC + KYP
When evaluating funds, investors should dig into the underlying strategy, asset mix, fee structure, redemption terms and historical performance. Is the fund concentrated in a specific sector? Are returns generated from income, capital appreciation or both? Are the fund managers experienced and skilled in working through volatile situations?
Private markets aren’t right for everyone. Know-Your-Client and Know-Your-Product requirements are of paramount importance.
You must understand and document your client’s profile — what their liquidity needs are, what their investment time horizon is and what their overall goals are. Advisors need to make sure clients know what they’re signing up for.
For those who don’t qualify as accredited investors, having the right guidance is key. And remember, some financial industry participants with investment discretion can substitute their accredited investor status for that of their clients.
Jay Bala is co-founder, CEO and senior portfolio manager at AIP Asset Management