While the term “private markets” appears in meeting agendas, allocation committee discussions, and industry reports, it can often mean different things to different participants. Private markets is a broad term that encompasses multiple asset classes, ranging from private equity and venture capital (which is typically considered a subset of private equity) to private debt and real assets, each with its own structure, mechanics, and role within an institutional portfolio.
Understanding the term and its nuances can help asset allocators better understand funds, managers, and investment performance. Industry efforts are underway to bring greater standardization to private-market marketing and reporting.
What Are Private Markets?
Private markets broadly refer to investments in assets that are not traded on public exchanges. This category encompasses not only privately negotiated stakes in companies and funds, but also includes real assets, such as real estate and infrastructure, which are acquired outside the public markets. Unlike publicly listed stocks and bonds with standardized disclosure and open market transparency, private market transactions occur directly between investors and companies, funds, or asset owners.
The term private markets is an umbrella term that can cover many asset classes, each with its own structure, risk characteristics, and liquidity profile. The category can be quite broad, encompassing equity stakes in privately held businesses, credit instruments lent directly to borrowers outside public debt markets, and real assets such as real estate and natural resources1.
Private Markets Defined: Investments Outside Public Exchanges
A defining characteristic of private market assets is that they are not traded on public exchanges. Transactions occur directly between investors and companies or funds, outside the pricing and disclosure frameworks found in publicly listed securities.
Key Takeaways
- Private markets are investments in assets that are not bought and sold on public exchanges.
- The private markets category spans multiple distinct asset classes like private equity and debt, venture capital(which is typically considered a subset of private equity), and real assets such as infrastructure and real estate.
- “Private markets” is an umbrella that covers a range of vehicles, including direct equity stakes, credit instruments, fund structures, and tangible physical assets.
- There are standardization efforts underway across the industry to improve comparability and support more consistent performance evaluation across asset classes.
- Clearer measurement is expanding access to the category, and more established analytical frameworks will enable better institutional allocators and investment committees to better evaluate private market investments
What Asset Classes Are Included in Private Markets?
Private markets are not a single investment type but a collection of distinct asset classes, each with its own structure, liquidity profile, and role within an institutional portfolio. Understanding what falls under the umbrella and how these categories relate to one another is the first step toward evaluating them clearly.
Private Equity
Private equity is the broadest category within private markets and refers to investments in ownership stakes in companies that are not publicly listed. Private equity can be acquired through a buyout or through growth capital, where investors take a minority stake in an established company seeking to expand2.
Venture Capital
Venture capital (which is typically considered a subset of private equity) is when investors provide capital to early-stage or high-growth companies that aren’t yet generating the revenue or cash flow required to access traditional capital. While venture capital is technically a subset of private equity, it operates in a distinct profile3.
Private Debt / Private Credit
Private debt includes loans and debt instruments that are privately negotiated and not issued or traded on public markets. The most common form of private debt is direct lending, in which a fund extends credit directly to a company without an intermediary such as a bank4 .
Real Assets
Real assets are tangible, physical investments like real estate, infrastructure, and natural resources like energy, timberland, and agriculture, which can also be acquired through private funds5.
Why the Term "Private Markets" Causes Confusion
Private markets can feel slightly confusing because they are not a narrowly defined category. The structure is ambiguous and can encompass many things.
The Umbrella Problem: One Term, Many Asset Types
The term private markets is an umbrella term for a wide range of investments that are not traded on public exchanges. Everything else can differ substantially. Private market investments can include a buyout fund acquiring a manufacturing company or a direct lending vehicle providing a loan to a mid-market software business. What counts as a private market can depend on the context of the conversation.
Overlapping Categories and Structures
The categories within private markets also do not fit neatly into clear, separate boxes. For example, while venture capital is a subset of private equity, the two are often discussed as distinct asset classes. Real estate can also be accessed through REITs and private equity structures. And private debt instruments can be embedded in real estate deals, blurring the line between credit and real assets.
Historical Lack of Standardization
Unlike public markets, which are subject to SEC regulations and frameworks, private markets developed without a universal definitional standard. Individual institutions, consultants, and data providers have historically categorized, reported, and managed private market investments in different ways. Industry efforts are underway to establish common benchmarks and reporting standards, bringing greater consistency to how private markets are described and evaluated.
How Benchmarks and Indices Bring Structure
Private Markets
The complexity of private markets has made it difficult to evaluate and compare investments across the category. Fortunately, standardized benchmarks and indices are helping change that, giving investors clearer tools for measurement and comparison.
The Role of Benchmarks in Private Markets
Public markets have shared indices as a common reference point for evaluating investments. Private markets lack an equivalent framework, although some organizations are working to change that. The Institutional Limited Partners Association (ILPA) maintains the ILPA Private Markets Benchmark, a composite covering more than 3,800 funds6. In January 2025, ILPA released updated reporting and performance templates as part of its Quarterly Reporting Standards Initiative to standardize how equity firms report feeds, returns, and performance metrics to limited partners7.
How Standardization Supports Comparison and Evaluation
One widely used tool is the Public Market Equivalent (PME), a methodology that allows allocators to compare private investment returns against the public market index. It uses the actual timing of fund cash flows, providing a basis for evaluating whether private market exposure has generated value relative to a liquid alternative8.
Why Understanding Private Markets Matters for Allocators
Having clarity on what private markets are and how they operate can directly influence conversations. An allocator who can distinguish between private equity and private debt, or explain why real assets have a different structural position within a portfolio, is better prepared to evaluate manager investments. Having an understanding also reduces the friction that arises when the same term means different things to different participants.
How Nasdaq eVestment™ Supports Private Market Understanding
Institutional allocators who need to evaluate private market managers and construct well-informed portfolio strategies require access to consistent data and analytical tools. Nasdaq eVestment™ for Private Markets provides institutional investment data, performance analytics, and market intelligence to support due diligence and portfolio analysis across the private markets landscape. This gives general partners and advisors granular insights evaluate funds, benchmark performance, and navigate the market with greater confidence.
Private Markets FAQs
Is private equity the same as private markets?
No. Private equity is one category within the broader private markets umbrella. Private markets also include venture capital (which is typically considered a subset of private equity),, private debt, and real assets. Each of these operates differently from private equity in terms of structure, capital deployment, and risk profile.
Why is the term "private markets" confusing?
Because it’s an umbrella term covering many different asset types, fund structures, and investment strategies, and the boundaries between them can be blurry. They all share the common characteristic of not being traded on public exchanges, but everything else differs substantially.
What are private market benchmarks?
Private market benchmarks are standardized tools that allow institutional investors to measure and compare the performance of private market investments in a consistent way. One example is the ILPA Private Markets Benchmark, which covers more than 3,800 funds and compares private investment returns against a public market index using actual fund cash flows.
How do private markets differ from public markets?
Public markets involve securities such as stocks and bonds that are bought and sold on regulated exchanges with standard requirements and continuous pricing with transparency. Private market investments are non-negotiable outside public exchanges, with limited disclosure and no daily pricing.
Why should institutional allocators understand private markets?
A working understanding of private market categories, structures, and measurement frameworks supports more effective due diligence, clearer investment committee discussions, and better-informed conversations with fund managers and consultants.
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Citations
- Invesco, “What Are the Differences Between Public and Private Markets?”
- Morgan Stanley Investment Management, “Introduction to Private Equity Basics”
- LPA, “Private Equity Glossary”
- Federal Reserve, “Private Credit: Characteristics and Risks”
- Georgetown STEERS Center, “What Are Real Assets? A STEERS Center Perspective”
- ILPA, “ILPA Private Market Benchmarks,”
- CFA Institute, “Private Equity Markets: Transparency and Development,”
- Cambridge Associates, “A Framework for Benchmarking,”
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