Private Markets Investing

More than 4,000 family offices now allocate to private markets. CNBC’s Hayley Cuccinello recently highlighted Preqin data showing that participation has grown more than 500 percent since 2016. Allocations rose nearly 21 percent in 2023, 26 percent in 2024, and another 8 percent in the first half of 2025. The pace is outstripping other investor groups and shows how quickly families are expanding their role in alternatives. This surge reflects both scale and intent. That level of wealth provides the freedom to commit to long-term strategies such as private credit, infrastructure, and direct investments. These are commitments designed to last across generations, and they demand patience as well as conviction. Selectivity is shaping the market as much as growth. As Cuccinello reported, families are trimming private equity allocations and concentrating capital in areas where they see steadier value. The focus on private credit and infrastructure points to an emphasis on resilience during periods of volatility. The implications reach well beyond families themselves. Fund managers and entrepreneurs are facing a new reality in which family offices represent a rising share of private market capital. Their ability to act with both scale and long-term focus is changing the way deals are structured and opportunities are evaluated. Family offices are setting the pace in private markets, and the momentum shows no sign of slowing. Reference: Hayley Cuccinello, CNBC, “Family offices flock to private markets with allocations surging over 500% in nearly a decade,” August 15, 2025

Protecting the Downside, Enjoying the Upside： Private Credit exhibits the lowest volatility and smallest drawdowns among alternative asset classes as you can see in the Pitchbook table below. Compared with private equity, real estate, venture capital, and secondaries, private credit shines with a volatility measure of 7.7% since year 2000. 7.7% is a fraction of equity market, and considerably less than PE and CRE due to its structural advantages. Its fixed-income nature provides stable and predictable cash flows through interest payments, insulated from market swings. Senior secured Direct Lending and Asset-Based loans are the hallmark for Private Credit, prioritize repayment, reducing default/loss risk. Diversification across industries, asset type and borrowers mitigate sector-specific shocks. Unlike private equity or venture capital, Private Credit volatility is muted compared to equity market volatility. Real estate faces property value fluctuations especially in a rising rate environment, while secondaries take-on the same risk of the underlying PE fund (albeit at discounted valuations). Over multiple business cycles, Private Credit has earned its reputation of ‘steadfast & reliable’ that stems from its contractual cash flows and covenant structuring strengths, helping to mitigate drawdowns. During the COVID collapse the drawdown for Private Credit was 0.4%, its best showing ever! My rule of thumb to strive for when investing is to generate an absolute annual return that is 50% higher than the annual volatility of that same investment (potential drawdown) of that investment. Across multiple business cycles, this rule results in superior performance, more consistent returns. Private credit is a resilient, income-generating allocation for any resilient (alternative assets) portfolio.

A common refrain in the venture ecosystem these days is how deal velocity is way down vs recent years and how tough the market environment is. This chart cuts to the heart of why and neatly illustrates what feels so 'different'. 🕵♀️ ➡ The closest public trading comps for most private tech companies are 'hyper-growth' software companies i.e. companies with an annual growth rate of 40% or above. At the peak in Nov-21, the public market was trading these comps at 45.4x NTM Revenue. Today, they trade at 7.6x NTM Revenue or 83% lower. 📉 Why? Well, interest rates have a lot to do with it. In the reign of perennially low rates, yield-hungry investors went looking for returns in equity markets, but rates have climbed from 0-0.25% in Nov-21 to 5.25-5.5% in Nov-23 changing the risk-reward dynamic and making equities less attractive. ➡ Public market valuations anchor the exit scenario for private market investments which means that they move in lockstep 👣 In fact, the upswing in the private markets during this last cycle was exaggerated by another (related) set of factors - there was a lot more capital in VC pockets as number and size of funds increased, driving up system liquidity. This activated fundamental supply-demand dynamics, pushing up valuations. Did you know that 50% of all the unicorns in the world were created in 2021? ➡ Companies that raised at a very high multiple in 2021 are now in one of two situations : 1️⃣ If they have enough cash, they're likely to stay out of the market right now so that they don't have to raise a down round 2️⃣ If they don't have enough cash, they have to undergo a painful process of price discovery in the market and often land at a lower valuation to last round, unless the headline price is maintained by doing a deal with some structure on it. In many cases, existing investors are extending runway with bridge rounds in anticipation of companies growing into their last round valuation. Economic cycles are an unfortunate but inevitable part of market behavior. It's an unpredictable variable that founders should not have to waste their time thinking about but sadly have to account for. This is where existing investors should show their value-add by helping portfolio founders strategize their fundraise and think through next steps. The bear market is where you make good on promises made during a bull market! 🐻 🐂 #venturecapital #fundraising #startups

We continue to advocate that investors think differently about their asset allocation strategies, especially given the higher nominal GDP environment in the United States. Specifically, our Regime Change thesis focuses on four key inputs (bigger deficits, heightened geopolitics, a messy energy transition, and stickier services inflation) that we think necessitate a new approach to traditional asset allocation strategies for investors. What do investors need to know? 1: 𝐖𝐞 𝐚𝐭 𝐊𝐊𝐑 𝐞𝐱𝐩𝐞𝐜𝐭 𝐟𝐥𝐚𝐭𝐭𝐞𝐫 𝐫𝐞𝐭𝐮𝐫𝐧𝐬 𝐚𝐧𝐝 𝐢𝐧𝐜𝐫𝐞𝐚𝐬𝐞𝐝 𝐚𝐥𝐥𝐨𝐜𝐚𝐭𝐢𝐨𝐧𝐬 𝐭𝐨 𝐧𝐨𝐧-𝐜𝐨𝐫𝐫𝐞𝐥𝐚𝐭𝐞𝐝 𝐚𝐬𝐬𝐞𝐭𝐬 𝐢𝐧 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨𝐬. The five-year forward median return across asset classes we forecast is fully 180 basis points lower than what we saw over the last five years (meaning there will be less differentiation between the best- and worst-performing assets in a portfolio, on average). At the same time, ‘old’ #portfolio correlations are breaking down, so asset allocation – not single asset volatility – has a much bigger impact on overall portfolio volatility. Our message is to seek out – all else being equal – more uncorrelated assets in one’s portfolio. 2. 𝐎𝐰𝐧 𝐦𝐨𝐫𝐞 𝐜𝐚𝐬𝐡-𝐟𝐥𝐨𝐰𝐢𝐧𝐠 𝐚𝐬𝐬𝐞𝐭𝐬 𝐥𝐢𝐧𝐤𝐞𝐝 𝐭𝐨 𝐧𝐨𝐦𝐢𝐧𝐚𝐥 𝐆𝐃𝐏 𝐠𝐢𝐯𝐞𝐧 𝐭𝐡𝐞 𝐡𝐢𝐠𝐡𝐞𝐫 𝐫𝐞𝐬𝐭𝐢𝐧𝐠 𝐡𝐞𝐚𝐫𝐭 𝐫𝐚𝐭𝐞 𝐟𝐨𝐫 𝐢𝐧𝐟𝐥𝐚𝐭𝐢𝐨𝐧 𝐭𝐡𝐢𝐬 𝐜𝐲𝐜𝐥𝐞. This includes building flexibility across mandates and carefully considering duration. As such, we strongly believe that an overweight to modestly leveraged Infrastructure and certain Real Estate investments with yield is prudent for adding ballast to one’s portfolio. We are also quite constructive on Asset-Based Finance, which provides numerous shorter duration opportunities with good cash flowing characteristics and sound collateral. 3. 𝐎𝐰𝐧 𝐦𝐨𝐫𝐞 𝐚𝐬𝐬𝐞𝐭𝐬 𝐰𝐡𝐞𝐫𝐞 𝐲𝐨𝐮 𝐜𝐨𝐧𝐭𝐫𝐨𝐥 𝐲𝐨𝐮𝐫 𝐝𝐞𝐬𝐭𝐢𝐧𝐲, 𝐩𝐚𝐫𝐭𝐢𝐜𝐮𝐥𝐚𝐫𝐥𝐲 𝐢𝐧 𝐚 𝐰𝐨𝐫𝐥𝐝 𝐰𝐡𝐞𝐫𝐞 𝐭𝐫𝐚𝐝𝐞 𝐛𝐚𝐫𝐫𝐢𝐞𝐫𝐬 𝐚𝐫𝐞 𝐢𝐧𝐜𝐫𝐞𝐚𝐬𝐢𝐧𝐠. We suggest tilting portfolios towards domestic consumption stories. We also favor more control situations, especially in the private markets, where operational improvements or strategic consolidation can, at times, drive robust profit growth, especially in #PrivateEquity. We continue to favor political changes that drive corporate reforms, hence our optimism around investing in #Japan. Still, as the convergence and blurring of the lines between national and economic security gains momentum, we expect to see more policies that encourage domestic savings, higher profits, and a lower cost of capital. Read more on asset allocation and portfolio construction in our Outlook for 2025: https://go.kkr.com/3v0WI7Q

The private markets reset is here and it’s getting more competitive. The fog is clearing and there is a power reshuffle across the ecosystem: 💥 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗶𝘀 𝗺𝗼𝘃𝗶𝗻𝗴 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁𝗹𝘆  • LPs are no longer just passive. They’re building liquidity through secondaries and buying stakes in GPs themselves.  • Fundraising? Still tough. But smart midmarket players are thriving while mega-funds stall.  • Retail and high-net-worth investors are quietly fueling new AUM channels via evergreen and semi-liquid structures. 📉 𝗧𝗵𝗲 𝗼𝗹𝗱 𝗽𝗹𝗮𝘆𝗯𝗼𝗼𝗸𝘀 𝗮𝗿𝗲 𝗯𝗿𝗲𝗮𝗸𝗶𝗻𝗴  • Financial engineering alone isn’t enough. Exit backlogs are worse than they've been in two decades.  • IRR isn't the only metric anymore MOIC and real distributions matter more than modeled upside. 🚀 𝗪𝗵𝗮𝘁’𝘀 𝘄𝗼𝗿𝗸𝗶𝗻𝗴 𝗻𝗼𝘄  • Deals over $500M are surging. Sponsors are writing bigger checks with more conviction.  • Operators are doubling down on real value creation with AI-enabled ops, cash generation, and exit prep that starts years in advance.  • Public-to-private is back. Expect even more as sponsors look for undervalued public gems. 🧠 𝗪𝗵𝗮𝘁’𝘀 𝗻𝗲𝘅𝘁?  • Expect more verticalized GP platforms, continuation vehicles, and cross-border carveouts.  • Watch for Asia's rebound (post-China retrenchment), and the continued rise of AI in fund ops.  • And if IPOs remain frozen, expect long-term corporate acquirers to gain leverage.  • 2025 isn’t about waiting for better conditions. It’s about proving you can win in these conditions. #PrivateMarkets #PrivateEquity #Fundraising #Secondaries #LPstrategy #OperationalExcellence #GPstakes #VentureCapital #AIinFinance #NextGenPE

The Financial Times's recent coverage of the potential majority investment by BlackRock into one of private equity's largest and most storied funds, Warburg Pincus LLC, is newsworthy on a number of levels. (1) BlackRock purchased Barclays Global Investors in 2009 to help accelerate their push that has led them to a pole position in passive investing and the ETF industry. A majority investment or partnership with Warburg Pincus LLC could have given them a similar position in private markets. The fact that BlackRock explored an investment or partnership with one of private equity's leading firms should signal that they view private markets as a major growth area. BlackRock has already made a major move in the alts space, investing in iCapital back in 2016, signaling the growing importance of the wealth channel's participation in alts. (2) This news is part of the broader trend of traditional asset managers looking to acquire alternative asset managers. Financial Times's Antoine Gara, Brooke Masters, Harriet Agnew, Arash Massoudi mention a few firms - Franklin Templeton, AllianceBernstein, & T. Rowe Price acquiring alternative asset managers. As traditional asset managers look to expand their offerings, in particular to be able to better serve the wealth channel's growing appetite in allocating to private markets, they will continue to acquire or take stakes in alternative asset managers. As larger alternative asset managers look to grow AUM and client relationships (and look to public markets), like the article mentions about CVC Capital Partners & General Atlantic considering IPOs, they will also look to acquire specialist managers or strategies to add to their diversified platforms. I anticipate we'll see a lot more consolidation in private markets over the coming years as the big get bigger. And the biggest will continue to find ways to get into alts. https://lnkd.in/g9BjEyUy

The surprise of 2025 so far 😳 71 % of SFOs expect to make 6 or more direct investments in the next year, up from 62 % last year - BNY Wealth Allocations are shifting fast. According to data platform Preqin the number of family offices with private markets exposure has increased by 524% since 2016. That’s some growth :) Families with $250M plus now put about 28% into private equity, edging out their holdings in public equities. Private market AUM reached $24T in 2023, more than double a decade ago. The tilt is toward direct control. Billion-dollar offices are moving beyond funds into co-investments and direct stakes. In some cases, more than a third of their private equity exposure is now held directly. The pipeline is expanding. Surveys show 71% of family offices plan to make six or more direct investments in the coming year, up from 62% a year earlier. Private credit, already a $1.6T asset class, is becoming a core allocation. Themes are evolving too. AI has emerged as a top priority, with nearly 80% of global families citing it as a key investment focus for the next five years. Infrastructure, real estate, and energy transition remain central. The scale is undeniable. Roughly 15,000 family offices now manage close to $6T worldwide, with forecasts pointing toward $9.5T by 2030. Family capital is no longer patient money on the sidelines. It is competitive, agile, and increasingly institutional. #familyoffice #wealth #realestate #apartments #logistics #workforcehousing #cre

We’re going to need a longer alphabet... Databricks's rumored Series K is the latest round driving a new high for Series E+ rounds deal share (1.72% of deals). As "the hottest" companies stay private longer and raise more late-stage capital, investor preferences are shifting to match within a broader private company investment market that's doubled in the last decade. After watching early-stage valuations implode post-2021, VCs and institutional investors are voting with their wallets for proven winners. With 20% of private market value concentrated in just ~1,200 unicorns and increasing means for private company liquidity, the promise of predictable returns in late-stage venture deals is bringing more, different buyers to the table. 75% of institutional investors now expect private markets to outperform public ones over the next 5 years meaning late-stage venture is fast becoming a new sweet-spot for investors of all types, offering attractive options including: ↳ De-risked Growth: Product-market fit is proven, unit economics validated, clear paths to profitability ↳ Shorter Exit Horizons: These companies are 2-3 years from liquidity vs 7-10 for early-stage ↳ Scale Without the Public Market Scrutiny: Many generate $1B+ ARR but can innovate and operate while avoiding quarterly earnings pressure ↳ Enhanced Liquidity: Secondary markets are transforming late-stage holdings from locked-up capital to tradeable assets, with platforms enabling quarterly liquidity windows and institutional-grade price discovery The convergence of AI infrastructure, energy, and technology is creating mega-opportunities that only late-stage companies can capture. These transformative deals require both massive capital deployment and proven execution – exactly what Series E+ companies offer. New players are reshaping the late-stage venture ecosystem as traditional VCs are being joined by: ↳ Sovereign wealth funds hunting AI infrastructure plays ↳ Corporate strategics bringing longer hold periods ↳ Crossover funds bridging private and public markets ↳ PE firms recognizing venture returns at lower risk profiles ↳ Institutional and retail investors looking to build diversified portfolios Increasing late-stage deal share isn't just a number, it's venture capital growing up. With companies staying private longer and reaching valuations that dwarf S&P 500 company market caps, and new regulations opening liquidity and tradability for private companies as assets, Series E+ becomes the "new early-stage" for institutional allocators and retail investors. When venture-backed companies can reach $10B+ valuations and generate meaningful liquidity while still private, late-stage venture isn't the final chapter before IPO anymore. For investors, the late-stage boom means accessing venture returns with infrastructure-like risk profiles. Welcome to the era where late-stage venture isn't late at all and private company data matters more than ever.

With another tariff induced red-tinged day hammering markets, I wondered: Do private markets follow public ones? The data suggests yes—but with a delay & at a fraction of the magnitude. A 1% increase in Nasdaq’s (QQQ) quarterly return translates to a 0.47% rise in median Series A valuations—but only after a two-quarter delay. The inverse holds true as well: when public markets contract, private valuations follow suit approximately six months later at roughly half the intensity. You can see this in the charts where the Nasdaq plummeted, but it would take some time for the private markets to react both for the median Series A, but even more for the top quartile (P75). These relationships are statistically detectable but don’t explain most of the variance: the Nasdaq’s lagged returns explain only about 7.5% of the variation in Series A valuations This means that while public market performance does influence private valuations, it’s just one factor among many. Most early-stage valuation variance comes from factors entirely independent of public markets: total venture capital fundraising, cycle positioning, growth rates among top-decile companies, & most critically, interest rates. In our earlier analysis, we discovered a hyperbolic relationship between the 10 year interest rates & Series A activity. As rates fall beyond certain thresholds, venture activity doesn’t increase linearly - it explodes. And the correlation here is much stronger at -0.43. For founders & investors, this suggests two practical insights: public market crashes will eventually ripple into the private markets, but with both a delay & diluted impact—and the unique attributes of individual companies & interest rates still matter far more. The private market isn’t immune to public market gravity, but it orbits with its own momentum around interest rates.

How UCLA’s Endowment Wins in Private Equity 🚀 Ever wondered how top endowments consistently outperform in private equity—while most institutions simply chase the biggest names? 💡 Here’s the secret: most endowments are missing a crucial layer of strategy—and it’s costing them billions in missed returns. Let’s break it down with Michael Marvelli what UCLA’s team does differently: 👉 Asset Allocation Isn’t Enough: - 90% of returns come from portfolio construction, but most endowments stop there. UCLA goes deeper—focusing on asset class strategy before even picking managers. 👉 The Lower Middle Market Edge: - UCLA targets private equity’s lower middle market—where multiples are lower, but the potential for arbitrage is massive. They buy at 8x, grow cash flow, and exit at 15.5x. That’s a 7.5x multiple uplift—just from arbitrage! 👉 Why Not Everyone Does This: - Most endowments are too big, too bureaucratic, or too focused on “world-class” managers. UCLA’s sweet spot? A specialized team, strong governance, and a willingness to invest in fund one—where real alpha is found. 👉 The Power of Focus: - By ignoring the crowded upper market, UCLA’s team becomes experts in a niche—building pattern recognition, trust, and real value for their GPs and founders. 👉 Founder Psychology Matters: - Founders often choose partners, not just the highest bidder. UCLA’s GPs build rapport, roll equity, and create alignment—turning sellers into long-term partners. So, what’s the real lesson here? It’s not about being contrarian—it’s about first-principles thinking, specialization, and relentless focus on where the market is inefficient. 🎯 Curious: - What’s the biggest blind spot in your investment strategy? - Have you ever considered the power of the lower middle market? Drop your thoughts below! 👇 #PrivateEquity #Endowment #InvestmentStrategy #AssetAllocation #LowerMiddleMarket #Finance #Investing #WealthManagement #Alpha #PortfolioConstruction Link to Podcast in Comments Below 👇