Private Equity and Alternative Investments: Are They Worth It?

Private markets can be worth it if you have long-term capital (7–10+ years), can tolerate illiquidity, and want diversification beyond public markets. The upside is potential return premium and lower correlation; the trade-offs are fees, lockups, capital calls, and manager selection risk. The right move is not “go all in.” It’s a measured allocation with a clear liquidity plan.

Last updated: January 28, 2026

If you’ve already maxed your 401(k)s, squeezed every basis point from index funds, and harvested every ounce of diversification traditional markets offer, this one is for you.

You’ve entered the portfolio frontier, where new money isn’t just about safety, but smart, calculated risk. That usually brings you to private markets and alternative investments.

Here’s the gist: private markets promise higher returns, lower correlation to public markets, and a degree of exclusivity, but they also come with real trade-offs, like illiquidity and accredited investor requirements.

An accredited investor, by definition, is generally someone with:

• Net worth over $1 million (excluding primary residence), or
• Income over $200K ($300K with a spouse).

This status is the entry ticket into most private equity (PE) and alternative strategies.

The strongest case for private equity and its alt cousins (private credit, real estate, and infrastructure) rests on performance.

Private credit: Over the nine-year period ending September 30, 2024, private credit delivered an average annualized return of 9.8%, compared to 3.1% for U.S. bonds and 6.5% for high-yield bonds.

(Source: BlackRock “Student of the Private Markets” Q1 2025 report, p. 5)

Private credit also had zero negative quarters from Q2 2022 through Q3 2024. Public bonds had five. That’s structural insulation.

Private equity: Private equity showed a similar edge, generating a 13% net return over 10 years through Q3 2023, outpacing every major public benchmark, including large-cap and mid-cap U.S. equities.

(Source: KKR “5 Things for Wealth,” Exhibit 2)

Compounding in private markets isn’t just a theory, it’s tangible. When layered well (equity, credit, real estate, infrastructure), private portfolios can protect capital and drive long-term wealth growth.

One of private equity’s greatest features is also its biggest challenge: illiquidity.

Multiple studies show that enforced illiquidity can protect investors from impulsive behavior. No tickers. No panic sells. No daily FOMO. Just long-term, time-stamped commitment.

The benefit? Behavioral discipline. Impulse kills compounding, and PE can insulate you from yourself.

This isn’t just “diversification.” It’s about building a portfolio that performs even when you’re distracted, emotional, or simply busy living your life.

The opportunity set in public markets is no longer what it used to be. Since the early 2000s:

• The number of public companies in the U.S. has dropped by over 30%.
• There are nearly 270,000 private companies with 50+ employees, but fewer than 5,000 public ones.

(Source: KKR “5 Things for Wealth,” Exhibit 4)

Private equity isn’t just targeting startups anymore. It’s buying mature, cash-flowing businesses, companies that would’ve IPO’d a decade ago, but now stay private longer (or permanently).

If you’re only investing in public markets, you may be missing where much of the growth and innovation now live.

Check out our Private Equity & Alternatives YouTube Short where we explore:

• What they are
• Why they matter
• How we’re using them in real portfolios today

Watch on YouTube

Ten years ago, getting into private equity often required $5M and an elite network. Today, investor-friendly structures are lowering friction:

• Monthly liquidity (in certain vehicles)
• 1099 reporting (instead of K-1s) in some structures
• Lower minimums (as low as $25K)

(Source: Ares “Private Market Insights” 2023)

Tech is transforming access, digital onboarding, rolling capital calls, and smarter allocation tools.

But don’t confuse ease of entry with ease of management. You still need:

• Diligent fund selection
• Clear capital commitment timelines
• A willingness to understand complexity

The walls are coming down. But you still need a blueprint.

You’ve heard it before: past performance is no guarantee of future results.

But the inverse is also true: past inertia guarantees nothing either.

Private markets aren’t a passing trend. They’re part of a structural redefinition of where value is created and how wealth is built.

Yes, if you:

• Have long-term capital
• Don’t need liquidity for 7–10 years
• Want diversification beyond public markets
• Want exposure to the “real economy” where most companies now live

No, if you:

• Might need the funds in 3 years
• Already feel stretched with portfolio complexity
• Aren’t ready to navigate fund vetting, access rules, and capital calls

Private markets offer asymmetric potential, but they’re not automatic wins. Even a small allocation demands real conviction and a tailored plan.

At a minimum, evaluate:

• • Fees
  • Capital timing and capital calls
  • Manager access and quality
  • Lockup periods
  • How this fits your liquidity plan and risk tolerance

• • • Private markets can add diversification and potential return premium, but only if you can hold through 7–10+ years of illiquidity.
    • Illiquidity is both the feature and the bug. It can reduce behavioral mistakes, but it also limits flexibility and demands a real cash-flow plan.
    • Manager selection matters more than allocation labels. A “private credit” or “private equity” tag doesn’t guarantee quality, underwriting and terms drive outcomes.
    • Fees, lockups, and capital calls are the real cost of entry. You need to understand when money is drawn, how it’s distributed, and what you pay along the way.
    • Don’t “go all in.” The best use is typically a measured allocation that complements (not replaces) a strong public-market core.
    • Access is easier now, but complexity remains. Lower minimums and smoother onboarding don’t remove liquidity risk or diligence requirements.
  
  

If you want to sanity-check whether private equity, private credit, or other alternatives fit your plan (and what allocation is appropriate), book a Wealth Clarity Call:

Wealth Clarity Call