The investment industry has come a long way, offering Americans more ways than ever to build wealth. But the rise of alternatives—once the exclusive domain of institutions and the ultra-wealthy—has made it more difficult to cut through the noise and identify what matters. We’ve developed a framework to help.
For most of our country’s history, investing was a gritty, private affair—a high-stakes game based on speculation, physical commodities, and handshake agreements between strangers. The deep, coordinated marketplace we recognize today only began to take shape about a century ago when the federal government started selling war bonds to the public. Those efforts eventually gave rise to the “Own Your Share of American Business” campaign, which framed public stock ownership not merely as a path to wealth but as a patriotic duty, especially during the Cold War.
In the modern era, it’s become a mark of prestige to be a public company—a signal that a business has arrived with the endorsement of Wall Street’s gatekeepers. Further, everyday conversations about the economy tend to orbit around market indices and highly visible businesses like Amazon, Apple, and Tesla.
Yet something has shifted right under our noses. The universe of U.S. public companies has collapsed—from roughly 8,000 at the height of the dot-com boom in the second half of the 1990s to fewer than 4,000 today¹. Many thriving companies have simply decided to stay private. At the same time, private credit—meaning loans made outside of public bond channels or the traditional banking system—has grown roughly 20-fold over the last two decades, now representing approximately $1.7 trillion in assets globally².
The evolution has brought a wave of new private investment vehicles, fueled by the industry’s savvy marketing and lobbying efforts in Washington to bring them to the wider public. Even the term “alternatives” implies a certain mystique—as if these assets exist in a different dimension of market reality.
“Private assets are neither inherently good nor inherently bad. Like most things in finance, the answer is ‘it depends.’”
That framing has led to both excitement and confusion. Some are jumping in with both feet, lured by promises of high returns with low risk. Others recoil at the lack of transparency, as if these businesses must be hiding something. Our view is more nuanced: private assets are neither inherently good nor inherently bad. Like most things in finance, the answer is “it depends.”
Alternatives Aren’t as Radical as They Sound
First, it’s important to recognize that the underlying asset is essentially the same whether you’re investing publicly or privately. Private equity is still equity, and private credit is still credit. Strip away the jargon and you’re left with the same two basic activities that have always driven investment returns: ownership and lending.
To own equity in a company or asset means holding a perpetual claim on its future. If the business grows, so does your investment, theoretically without limit. The catch is that equity is a residual claim: you only get paid after everyone else—suppliers, lenders, and the tax authorities—has had their share. That’s precisely what makes equity riskier: when a company’s obligations outpace what it makes, the owners have the potential to lose everything.
To own a credit instrument means to act as a lender. You hand over capital for a fixed period in exchange for contractual interest payments and the return of your principal. Your upside is capped—you’ll never earn more than the agreed-upon rate—but you get something valuable in return: seniority and protection. Creditors have a legally enforceable right to be paid before the owners do and can seize pledged assets if the borrower defaults.
When approached with the right framework, equity and debt can both be powerful ways to generate wealth.
Why, Then, Are Companies Going Private?
It’s natural to suspect that companies going private—or finding new ways to borrow—have something to hide. While that may be true for some, the more mundane reality is that being public can be burdensome.
“…the more mundane reality is that being public can be burdensome.”
Public companies report their financials every quarter, face relentless pressure to support their share price, and must disclose material information—including profit margins and R&D spending—that becomes visible to customers and competitors alike. They also live under the threat of activist investors: outsiders who campaign for strategic changes, often loudly and disruptively. All of this creates serious demands on time, money, and management bandwidth. Thus, many owner-operators prefer to maintain a controlling private stake, keeping them in the driver’s seat of their company’s future.
Meanwhile, public debt carries its own complications. Bonds sold on public markets come with rigid terms. For the corporate borrower, changing those terms—even for good reasons, like adjusting to emerging growth opportunities—requires wrangling consent from thousands of anonymous bondholders. Traditional bank lenders present their own frustrations for borrowers: they can be slow-moving, formula-driven, and unaware of the nuances of how a company truly operates.
The move toward private capital sidesteps many of these headaches. In some respects, it’s a decision to forgo public distraction and red tape for operational freedom. For many companies, that’s a worthwhile tradeoff, especially those with long-term horizons who would rather focus on building lasting value than managing quarterly expectations.
Five Principles for Investing in Private Assets
This all raises the question: are private assets worth your consideration? Our answer is yes, but with clear eyes.
To be sure, we believe public markets should remain the bedrock of most well-constructed portfolios. It’s a large opportunity set that we expect to remain fertile ground for finding exceptional investments. But ignoring private assets means forgoing a critical and growing portion of the economy. Roughly 88% of U.S. companies with annual revenues above $100 million are private, and they represent some of the most dynamic and innovative businesses in the country. They also include operators of infrastructure assets—those that transport goods, energy, and data to where they’re needed most. These will represent the backbone of the global economy for generations to come, offering a reliable source of both growth and income.
“Roughly 88% of U.S. companies with annual revenues above $100 million are private, and they represent some of the most dynamic and innovative businesses in the country.”
With that said, not all private assets are created equal. Some are higher quality than others, and—critically—the portfolio teams managing them can differ enormously in how they conduct diligence and assess risk. Over our firm’s history, we’ve been deliberate about whom we partner with. Having lived through the good and bad of multiple market cycles, we’ve built our manager selection approach around the following principles:
1. Bigger is not always better. The largest private asset managers are skilled at raising funds from investors. The flip side of that success is the pressure to deploy all that dry powder, which can lead to undisciplined deal-making. That is, intense competition among the mega funds for the same assets can hurt their ability to negotiate favorable terms. The result is that investors aren’t always adequately compensated for the risks they’re assuming. In our experience, some of the richest opportunities lie with smaller, specialized managers you may have never heard of—those who have quietly fished in less crowded waters that the largest managers overlook because of their size.
“…some of the richest opportunities lie with smaller, specialized managers…who have quietly fished in less crowded waters…”
2. Investors must demand protections. One of the most troubling trends in private credit has been the rise of “covenant-lite” loans—deals that exclude legal protections that give lenders recourse when a borrower hits trouble. Covenants aren’t just fine print—they’re the early-warning system that lets lenders intervene before a manageable problem becomes a catastrophic one. Investors should be wary of managers who routinely waive these protections just to win the deal.
3. Look for focused, cycle-tested teams. Investing can look easy in a bull market. What separates the best managers from their peers is how they behave—and how their portfolios hold up—when conditions deteriorate. We favor teams whose track record includes difficult periods and not just a stretch of flattering, easy conditions. We also prefer teams whose asset focus stays firmly within their circle of competence, backed by a deep bench and strong culture, over teams that have quietly drifted into new territory to chase a marketing opportunity.
4. Size your exposure appropriately. Private assets are illiquid by nature and cannot be sold at a moment’s notice. Investors should size their positions carefully, keeping enough in liquid reserves to accommodate surprises (whether personal or market-driven) without being forced to sell at the worst possible moment. They should also confirm they’re being compensated for accepting illiquidity. With that said, we have found that illiquidity isn’t purely a drawback: it can serve as a useful guardrail against emotional selling in the middle of market turmoil that will come to pass.
5. Be nimble. The right investment to make within the capital structure (i.e., debt versus equity) and by asset type (e.g., real estate versus infrastructure) always depends on market conditions and valuation. For example, in some environments, senior debt may offer returns that resemble equity, but with materially less risk. Investors should remain flexible rather than assume that what’s worked before will continue to be the best option ahead.
The Road Ahead
Private assets have become a fixture in the investment landscape—fueled by breathless coverage in the press and silky marketing from large institutions. We’ve long urged clients to approach them with caution. But that same scrutiny should be applied with equal force to public markets, where short-termism, speculation, and high concentration in a handful of names mean that “public” is no guarantee of quality. The goal isn’t to avoid one category in favor of the other—it’s to be rigorous about both.
“At their best, private assets offer access to a broader swath of economic activity, reliable income streams, attractive risk-adjusted returns, and genuine diversification.”
At their worst, private assets can be a vehicle for asset managers to extract high fees, dressed up in complex terms and promises of low risk. At their best, they offer access to a broader swath of economic activity, reliable income streams, attractive risk-adjusted returns, and genuine diversification. We’ve spent years building the proprietary framework and relationships required to tell those apart and welcome a conversation about whether private assets belong in your portfolio.
Sources:
¹ World Bank, Listed Domestic Companies
² Bloomberg, November 2025
The above information is for educational purposes and should not be considered a recommendation or investment advice. Investing in securities can result in loss of capital. Past performance is no guarantee of future performance.
