Private market transactions involve the buying, selling and ownership of assets not traded on public exchanges, The private markets sector has grown dramatically over the past two decades and now represents a significant portion of the global investment landscape, appealing to institutional investors for its potential to offer higher yields in exchange for reduced liquidity. The private markets have expanded from approximately $2 trillion in 2006 to over $14 trillion as of 2023. This growth is driven by a decline in the number of publicly traded companies, a rise in alternative financing sources, and innovation in fund structures, making private investments more accessible to a range of investors. Private market assets are predominantly owned and managed by institutional investors such as pension funds, insurance companies, endowments, foundations, sovereign wealth funds, family offices and in some situations ultra-high net worth individuals.
Private markets are broad and include the following main categories:
- Private Equity – Direct fund interests (primary & secondary), co-investments, direct company stakes, GP-led continuation vehicles and portfolio company sales and recapitalizations.
- Private Credit – Direct loan portfolios, credit fund interests, specialty finance, asset-based lending exposures, mezzanine and distressed debt positions.
- Real Assets – Private real estate equity/debt, investments in physical or tangible assets like infrastructure, farmland, renewables, energy, timberland and commodities.
- Venture Capital – Fund interests, direct holdings, fallen angel disposals and founder liquidity.
- Esoteric Assets – Fund GP sale, life settlements, structured settlements, royalties, receivables, patent rights, litigation claims, carbon credits, subrogation claims and many other forms of less liquid esoteric assets.
The appeal for private assets is tied to its ability to generate high risk adjusted returns. Typically, these assets offer Higher Yields (Illiquidity Premium), Diversification and may provide an Inflation Hedge.
Lack of active trading of these assets create liquidity risk for institutional investors limiting their ability to dispose assets to meet any liquidity needs. Prive Markets provides access to liquidity through its network of institutional investors with stable bench of capital and appetite for assets. These institutional investors span across not only secondary funds but also a bench of strategic investors that are able to provide liquidity.