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Typically, investors focus on more traditional asset classes, like stocks and bonds, where information is often readily available and digestible. Sometimes, however, sophisticated qualifying investors increase their capital allocations to private markets for reasons they believe are compelling enough to make it worth taking the risk. This primer will provide an introduction to private markets investing, explore key reasons behind why investors allocate capital to the asset class, and evaluate some of the key risks and challenges that potential investors should consider.

Despite the hurdles and distinct challenges that come with adding private markets to an investment portfolio, many of the most sophisticated institutional investors are allocating to private markets. Historically, the asset class has generally outperformed public markets due to a range of factors, including the broader investment landscape, information inefficiencies, and operational control. Fueled by a less efficient market and significant operational control, private markets are likely to continue their track record of outperformance.

A dynamic portfolio can help address a number of investment challenges that families of wealth face, including varying multigenerational preferences, unique tax considerations, domicile requirements, and specific beneficiary needs. Yet there is also such a thing as overcomplexity, which can waste time, cause confusion, decrease potential returns, and increase risk. This paper reviews three indicators of an overly complex portfolio and discusses best practices for addressing them.