Wealthy Investors Shift to Private Markets
High-net-worth investors and family offices are increasingly allocating capital to private markets, including private equity, real estate, and other alternative assets. This shift is seen as a way to achieve above-market returns and is becoming a status symbol among Chicago's elite. Advisors helped investors increase these allocations significantly in 2025.
- Over the last 25 years, private equity has outperformed global public markets by more than 500 basis points annually, a trend that is more pronounced when public stock returns are subdued. - Ultra-high-net-worth individuals (over $30 million in assets) now allocate around 50% of their portfolios to alternative assets, a significant increase from 10-15 years ago and much higher than the 25% allocation typical for high-net-worth investors ($1 million+). - This shift is driven by a desire for diversification away from public market volatility, passive income streams, and a hedge against inflation. - The number of family offices investing in private markets has surged by over 500% since 2016, and they are increasingly prioritizing private credit and infrastructure in their new allocations. - The primary drawback of these investments is low liquidity, with capital often locked up for periods ranging from 7 to 12 years in private equity funds, making it difficult to access money quickly. - Looking ahead to 2026, deal activity in private markets is expected to strengthen, rebounding from a slowdown as financing costs ease and valuation gaps between buyers and sellers narrow. - Technology is a key sector of focus for new private equity investments, alongside a continued emphasis on infrastructure, which is projected to see the biggest increase in allocations from family offices. - New fund structures and the use of tokenization are beginning to make private market assets more accessible, with firms like KKR and Apollo tokenizing parts of their funds to allow for smaller investment sizes.
