Asset Management

Understanding the Private Market and How It Differs from the Public Market

A Guide for Financial Advisors

August 27, 2026

Print View

Key takeaways

The private market refers to investments that are not traded on public exchanges including private equity, venture capital, private credit and real assets.
The private market and the public market each play an important role in today's investment landscape, and they differ in how investments are accessed, valued, traded and evaluated.
As the private market has grown in size and importance, understanding its intricacies has become increasingly vital for financial advisors.

Introduction

Today, it's common to read financial headlines about a highly anticipated IPO, another private company raising record amounts of capital or the latest innovation-driven private business breaking boundaries. As private companies receive more attention, clients are asking about top pre-IPO names before they hit an exchange. That means advisors need a working fluency in private market mechanics, not just its headlines.

What is the private market?

Unlike investments traded on public exchanges, the private market refers to investments that are typically accessed through privately negotiated transactions and specialized investment vehicles. While private market investments vary, they all share one defining characteristic: They are not continuously bought and sold on a public exchange, such as the NYSE or Nasdaq.

Understanding the major segments of the private market

The private market spans several distinct categories, summarized below.

Private equity: Investments in privately held companies. Typically, the companies tend to be more mature private companies and are often traded via pooled investment vehicles. Note: Clients often use "private equity" as shorthand for the entire private market. It's one segment, not the whole picture.
Venture capital: A subset of private equity focused on earlier-stage companies. Higher risk, higher potential upside investments and longer path to any liquidity event.
Private credit: Non-bank lending and privately originated debt that can serve a similar role to public fixed income for some investors. Borrower quality, structure and risk characteristics can differ significantly.
Private real estate and infrastructure: Ownership or financing of physical assets like commercial property, data centers, energy and infrastructure. Often used as an inflation hedge.
Natural resource assets: Farmland, timberland, and similar holdings that are generally viewed as long-horizon diversifiers uncorrelated to the public market.

Key characteristics of the private market

Compared with publicly traded investments, private assets often involve:

Eligibility requirements: Many private investments are limited to accredited investors, qualified purchasers or institutional participants and confirming eligibility is a suitability step for advisors, not just a gating criterion.
Risk-return characteristics: Private companies are often earlier in their growth journey than public companies. While they may offer greater growth potential, they also may carry higher risk compared to public-market equivalents.
Liquidity: Exit opportunities can be limited, structured, or event-driven. Advisors should consider whether a client's investment timeline and liquidity needs align with the expected holding period.
Valuation: Pricing may rely on a range of data sources, including periodic fair market valuations, financing rounds or secondary market activity rather than continuously observable market prices. Helping clients understand how investments are valued can set appropriate expectations and provide important context for performance discussions.
Fees: Private market investments may have more complex fee structures than publicly traded investments, reflecting the active sourcing, due diligence and ongoing management required in the private market. Depending on the investment vehicle and fund structure, investors may pay management fees, performance-based fees, fund-related expenses and other costs. In return, investors may gain access to specialized investment manager expertise and opportunities that are generally unavailable in the public market. These characteristics may provide differentiated sources of return, including the potential to benefit from the illiquidity premium associated with this asset class.

The private market vs. the public market

Private and public markets offer distinct opportunities with characteristics that may make each one appropriate for different investment objectives. It’s important for advisors to understand how the private market compares with the public market and what those differences mean in practice when evaluating investment opportunities.

At a glance: The private market vs. the public market

Characteristic	Public market	Private market
Access	Broadly available through brokerage accounts and exchanges.	Access varies by investment structure, eligibility requirements and ability to meet investment minimums.
Investment risks	Market, sector and individual security risks, as well as liquidity, valuation, and execution risks, which can vary based on security and market conditions.	Subject to many of the same risks as public investments, though market, liquidity, valuation, and execution risks may be more pronounced due to less frequent trading, less observable pricing, and potential transaction restrictions.
Liquidity	Typically, more liquid securities traded on public exchanges generally provide more frequent and/or less costly opportunities to buy or sell, though liquidity varies by investment type and market conditions.	Liquidity varies by investment structure and may be more limited, with transactions dependent on redemption windows, secondary market availability, or other liquidity events. Investments may also be subject to transfer restrictions or extended holding periods.
Valuation	Generally defined by observable market pricing with frequency varying by investment type.	Typically valued periodically using company financial information, financing rounds, comparable transactions and other inputs.
Transparency	Extensive public disclosure and regulatory reporting.	Information varies by issuer, manager, and investment structure, no requirements to report.
Fees and expenses	Typically standardized, with fees generally limited to fund expense ratios, advisory fees, or trading costs.	Fee structures may be more complex and often include management or performance-based fees, fund expenses, and other costs, reflecting the active sourcing and specialized opportunities available in the private market.
Transaction mechanics	Market orders (orders seeking execution at the next available price) for stock trades generally execute immediately during market hours.	Execution may vary based on private company approvals, transfer restrictions (such as rights of first refusal), and the availability of a matching buyer or seller.

While public and private markets differ in important ways, both offer distinct characteristics that may support different portfolio objectives, such as growth, income, risk management, and inflation hedging. The appropriate balance between investments across the two markets will vary based on each client's objectives, financial circumstances, liquidity needs, and risk tolerance.

Building a foundation

The private market has become an increasingly important part of today's investment landscape. Developing fluency in this space can help advisors have more informed conversations with clients, evaluate investment opportunities with greater confidence, and better understand the role the private market may play within a diversified portfolio.