Investment professionals who spend their careers in public equities often need a new analytical approach when they first engage with private markets because they play by different rules. Prices don’t update continuously, capital doesn’t move as freely, disclosure is on a different schedule, and formats vary from manager to manager.
Private markets are structured differently from public ones and operate under a distinct framework for valuation, liquidity, and reporting. This is further compounded by the fact that private markets have two distinct layers: the underlying assets and the fund structures through which investors access them.
As institutional allocators, investment committees, and advisors increasingly evaluate private markets alongside public investments, understanding the differences is critical. While private markets are growing in scale and scope, so too are calls from investors and industry bodies for greater transparency and standardized pricing.
What Makes Public and Private Markets Different?
Public and private markets are both arenas for raising and investing capital, but they operate differently and under different rules. In public market, securities are listed and traded on regulated exchanges and are accessible to a wide range of investors. Prices are updated continuously during trading hours. However, private market transactions are negotiated directly, and valuations are determined less frequently.
The Core Distinction: Liquidity and Pricing
The most straightforward distinction is liquidity and how often prices are updated. In public markets, shares, bonds, and other assets can typically be bought or sold at any time during trading hours, with prices reflecting real-time activity and investor sentiment. These markets are highly liquid, allowing investors to move in and out of positions freely. Listed companies are required by financial regulators such as the Securities and Exchange Commission in the United States (SEC) or equivalent bodies in other countries to publish standardized financial reports regularly, ensuring all investors have access to transparent and consistent information.
Private markets differ from public markets in nearly every aspect. Valuations for private companies and assets are generally updated quarterly or at the time of a major transaction, and exiting an investment typically requires negotiating a sale rather than trading on an exchange.
Key Takeaways
- While public markets offer daily or more frequent pricing, private markets price less often, usually quarterly or at the time of transaction.
- Public assets can usually be bought or sold quickly on an exchange, while private investments generally require longer commitment periods.
- Public markets mandate standardized disclosures, while private market information can come in different formats with different timing.
- Public investments can typically be bought and sold at any time, while private investments generally involve longer holding periods, often measured in years.
- Industry efforts are improving standardization and reporting in private markets.
How Public Markets Work
Public markets encompass the stock and bond markets that most investors know. Stocks, also known as cash equities, are traded on regulated exchanges that are open to a wide range of investors. Bonds, on the other hand, are primarily traded over-the-counter (OTC), meaning transactions occur directly between parties rather than through centralized exchanges. Both stocks and bonds are subject to regulation, but their trading venues differ: exchanges provide transparency and continuous pricing for equities, while OTC markets offer flexibility for bond trading with prices negotiated between buyers and sellers.
Exchange-Based Trading and Price Discovery for Equities; OTC for Bonds
The backbone of public equity markets is the exchange a regulated venue where buyers and sellers submit bids and offers. This auction system allows prices to update continuously as trades are executed, reflecting the collective judgment of participants at any moment. In contrast, bond trading mainly occurs OTC, where prices are determined through negotiation rather than public auction. Trading for equities is continuous and transparent, while OTC bond trading offers flexibility but less real-time transparency.
Daily Liquidity and Accessibility
The main characteristic of the public market is liquidity, the ability to immediately buy or sell a security without materially moving its price, and public markets are structured to support rapid buying and selling. Public markets are open to any investors, although some platforms may have income or asset requirements.
Regulatory Disclosure Requirements
Public markets are highly regulated. The SEC requires all listed companies to file standard, audited financial reports on a regular schedule, including annual reports, quarterly updates, and event-driven disclosures.
How Private Markets Differ
Private markets operate in another fashion. Private assets, such as private equity, private credit, infrastructure, and real estate, are not listed on public exchanges. Additionally, private markets have two distinct layers: the underlying assets and the fund structures through which investors access them. Meanwhile, transactions are negotiated directly between parties, and capital is committed for defined periods. Pricing, liquidity, and disclosure each follow their own rules.
Less Frequent Pricing and Valuation
Unlike public markets, where prices are updated in real time, private markets typically conduct valuations at set intervals most often quarterly. This periodic approach to pricing means that returns may not react immediately to market news or events, providing a different cadence compared to the real-time price movements seen in public markets.
Longer Holding Periods and Commitment Terms
Investing in private markets typically requires a long-term commitment, with holding periods for underlying portfolio companies often extending over multiple years. Commitments to private market funds are also generally structured over extended time horizons, reflecting the long-term nature of these investment vehicles. Illiquidity in private markets stems from both the difficulty in selling underlying assets quickly and the contractual terms of the fund structure. Unlike stocks, which are traded on exchanges and can generally be sold at any time during trading hours, exiting a private market fund investment before its natural end often requires negotiating a sale on the secondary market. However, some newer fund structures, such as interval or evergreen funds, are designed to provide periodic redemption windows, allowing investors more flexibility to exit positions sooner than traditional funds.
Why Private Markets Can Feel Complex
Private markets can seem more complex than public markets. However, taking a closer look at three key factors can often help investors better understand these markets.
Understanding Valuation Timing Differences
Price is continuous in public markets, but private markets typically price quarterly, and valuations are typically not finalized for 45 to 60 days after a quarter ends given the number of inputs that go into valuing illiquid assets, as well as procedural hurdles such as annual audits and third-party assessments. This reporting cycle can feel slower to those accustomed to the real-time pricing used in public markets. It’s not that private markets are less rigorous, but rather that the underlying assets require a valuation methodology as they cannot rely on observed values.
The Role of Standardization Efforts
There are efforts underway in the private markets industry to address many of these transparency gaps. In January 2025, ILPA released updated Reporting and Performance Templates as part of its Quarterly Reporting Standards Initiative.
The Growing Focus on Transparency and Standardization
The private markets industry is working to address information gaps and reporting inconsistencies. As noted above, ILPA released updated quarterly reporting and performance templates in January 2025. The CFA Institute notes that approximately half of the private equity market has adopted the existing ILPA template to date, while the rest may increasingly face mounting pressure to do so.
The rationale is that standardized reporting can reduce the friction of comparing fund performance across managers and strategies, making it easier for investors and committees to evaluate.
Navigating Private Markets With Better Data
A lack of transparency and standardization in private investments makes analytics highly valuable to decision-makers. Nasdaq eVestment™offers a platform that gives institutional investors, consultants, and asset managers the tools to conduct research and analyze performance across more than 5,000 GP profiles.
Nasdaq eVestment's partnership with ILPA further supports the industry's transparency efforts by giving ILPA members access to tools that improve standardization and efficiency. For investment teams navigating private market complexity, Nasdaq eVestment provides a structured analytical foundation.
Public vs. Private Investing Frequently Asked Questions
What is the main difference between public and private investing?
Public investing involves trading securities with real-time pricing, allowing investors to buy or sell shares at any time during regular market hours. In contrast, private investing describes the process of committing capital to investment fund structures that access private assets, where valuations occur periodically, commitment terms are defined upfront, and exit opportunities are generally restricted by the fund’s contractual rules.
Why do private markets feel more complex than public markets?
Valuations are updated quarterly, disclosure formats vary across fund managers, and capital cannot be withdrawn on demand. These differences call for a longer planning horizon and a different analytical framework.
How often are private investments priced?
Private investments are typically valued quarterly rather than in real time. Due to the complexity and need to find comparable analyst or discounted cash flow models, valuations are generally finalized 45-60 days after the end of each quarter.
Can private investments be sold easily?
No. These investments are not liquid like public investments. Investors seeking to exit before a fund's natural end may access the secondaries market, where fund stakes can be bought and sold between parties. Some fund structures offer periodic redemption requests but terms should be reviewed at the fund level.
What is driving transparency improvements in private markets?
In January 2025, the Institutional Limited Partners Association released updated quarterly reporting and performance templates to make fund disclosures more consistent and comparable across managers.
Are private investments riskier than public investments?
Not necessarily. While private and public investments have different risk and liquidity characteristics, neither is inherently superior for all circumstances. Institutional allocators typically evaluate both asset classes within the context of their overall portfolio objectives.
How can investors evaluate private market opportunities?
Institutional investors typically evaluate private market opportunities by assessing fund managers' track records, investment strategies, and risk parameters, fee structures, and benchmarking performance against relevant peer groups. Standardized analytics tools and data platforms can support this process by enabling consistent comparisons across managers and strategies.
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