As high-net-worth investors become more sophisticated, they also seek a higher level of sophistication in their portfolio strategies. That includes a growing interest in private market investments. With the opportunity for more income, higher capital appreciation, lower volatility and more degrees of flexibility through a broader selection of asset classes, private investments have significant appeal for HNW clients. When strategically allocated, private market investments can deliver improved risk-adjusted returns.

When Clients Ask About Private Market Investments, Will You Be Ready?

While offering a number of potential advantages for investors, private market investments also come with a higher layer of complexity and liquidity concerns. The majority of financial advisors have not yet incorporated private investments and strategic asset allocation in their portfolio management approach. Given that nearly 90% of companies with a revenue of over $100M are private (S&P Capital IQ Jan 2022), financial advisors and their clients who do not explore private marketing investment are missing out on a significant percentage of the investable economy. 

To better illustrate the potential opportunities around private market investments, consider the following hypothetical client scenario. Age 64, Harry has a $6.5M portfolio allocated as follows: $3.7M in Individual Large Cap Public Equities; $850K in ETFs/Mutual Funds Mid Cap Equities and International Equities; $6.65M in Individual Public Bonds; and$300K in ETF Foreign Bonds. His portfolio includes both taxable and non-taxable accounts.

Harry’s investment objective is to achieve balanced growth. While he’s concerned about stock market volatility, he also understands that stocks represent the primary source of capital appreciation. With plans to retire soon, Harry wants more income, lower volatility, and appropriate capital appreciation. His goal is to receive around $250,000 in reliable annual income during retirement.

To achieve this goal, Harry is looking for an advisory team that can offer him a broader range of sophisticated portfolio strategies, including private market alternatives. Harry meets with his long-time financial advisor, Michael, who works for a National BD/RIA. Together, they discuss Harry’s retirement plans, desired annual retirement income, and the amount and type of capital appreciation he feels comfortable with on the equity side of the portfolio.

Based on Harry’s concerns and balanced investment objective, Michael puts together his recommendations for a retirement-oriented portfolio strategy. In doing so, he explores various asset classes available on his BD/RIA investment platform and prepares several different equity and fixed income portfolio allocations, settling on the following new asset allocation.

The information contained above is for illustrative purposes only.  

What Michael Misses: Private Market Alternatives

Overall, Harry is pleased with the expected 7.06% return and the reduction in equity allocation from 70% to 60% in Michael’s strategy, which should result in slightly lower risk and volatility. Harry asks Michael about private market investment strategies he’s read about in financial publications and heard from executive friends who are clients at JPM private bank. Michael informs Harry that his BD/RIA does not have private market alternatives. Given his lack of experience with these types of investments, Michael is hesitant to offer Harry the guidance he’s looking for.

After reviewing Michael’s portfolio recommendations, Harry is inclined to agree in the absence of additional knowledge. But then Harry talks to another executive friend who just met with a private bank portfolio strategist. During this meeting, the portfolio strategist makes two portfolio recommendations: 1) all liquid public stocks and bonds; and 2) up to 20% in private market alternative investments, which was an acceptable level of illiquidity.

Intrigued by his friend’s experience, Harry meets with a JPM private bank strategist, explains his retirement plans and goals, and his retirement cash flow expectations of $250,000. The JPM team asks about Harry’s illiquidity preference, and Harry tells them he does not expect to make any withdrawals from the portfolio beyond what he needs to live. Based on what Harry has shared with them, the JPM team prepares and presents the following portfolio recommendation.

Total expected return for this portfolio is 7.6%, $494,000. This represents $35,000 more expected total return than Michael’s recommendations, which did not include any private market investments.

Cash flow generated: approximately 6.23% from the bond portfolio and 1.4% from the equity portfolio for a total of $216,600, which is $18,220 more than the income from Michael’s recommended portfolio.

The information contained above is for illustrative purposes only.  

Curious, Harry asks the JPM private banking strategist why they recommend including private equity, private credit, and private infrastructure investments. The strategist explains that private equity can offer illiquidity factor returns, lower information transparency returns, more opportunity for company value accretion, inefficient market pricing, and has a 25-year history of outperformance vs. public stocks*. The strategist also explains that private credit offers enhanced spread premiums, a broader range of asset types, floating rate structures, seniority claims, unique terms, and limited liquidity. All of which sounds great to Harry.

The JPM teams supplies Harry with educational material and website links that fully explain private equity, private credit, infrastructure investment strategies and their advantages and disadvantages. Harry reads through the materials and asks for another meeting with JPM to review his questions and concerns.

During the next meeting, the JPM investment team is joined by the private market alternatives investment research team which conducts the due diligence on each private market investments manager. This process is explained to Harry.

Which Way Does Harry Go with His Portfolio? Michael vs. JPM.

Harry considers the two proposals presented to him: one from his current advisor, Michael, and one from the JPM investment team. Given that the JPM portfolio recommendation generates $35,000 more projected total return and $18,220 more annual income, Harry decides that he’s more confident in having $216,600 in annual income to meet his retirement income needs.

Harry calls Michael, saying he appreciates their 15-year relationship and would have liked to remain with him. However, Harry feels compelled to choose the team that can help him capture the opportunity in private market investments to create more income and higher expected returns. Harry simply cannot justify giving up that extra annual income.

Michael explains that as soon as his BD/ RIA provides him with private market investment strategies, he could offer Harry similar recommendations. When Harry asks Michael about his own knowledge of private market investments and whether Michael is a CAIA  (Chartered Alternatives Investment Analyst), Michael answers that is he does not have this experience, but perhaps someone in his home office does. This isn’t good enough to secure Harry’s confidence.

Harry responds that he feels JPM has the knowledge, experience, breadth and depth of due diligence to reassure him in his choice, and that he does not believe Michael is well positioned to provide higher returns any time soon. Thanking Michael for his relationship over the years, Harry lets him know that he will be transferring his account to the private bank at JPM.

From Missed Opportunity to Clear Differentiator

For financial advisors looking to differentiate their practice and compete more effectively for high-net-worth clients, private market investments offer a sophisticated approach to portfolio construction and wealth management. While representing an attractive opportunity, private market investments require a high level of confidence on the part of the advisor. Sandro Wealth Management partners with advisors to elevate their understanding around private market investments and win their clients’ confidence. Let’s go back to Michael.

Had he been partnering with Sandro Wealth, Michael could have immediately offered Harry a recommended portfolio strategy that includes private market investments with the potential to deliver higher returns and more annual income. Our investment team includes private market investment strategists and conducts private market alternatives investment research and due diligence, adding confidence to HNW clients seeking a more sophisticated portfolio approach. We bring the expertise, support, education, and technology financial advisors like Michael need to capture these investment opportunities.

• Our strategic asset allocation and private market investments experts share their wealth of knowledge to educate advisors and their clients on private investments, elevating their confidence levels. 

• Working as part of the advisor’s team, we meet with clients to identify their goals, needs, values, and preferences, and to increase their understanding of private market investments and their advantages.

• Our team continues to consult with advisors and their clients across multiple meetings to build trust and confidence in their private market investment capabilities.

• We help advisors brand and market their practices as uniquely qualified in private investment strategies — a clear and strong competitive differentiator.

• As new asset classes emerge, we continue conducting research and keep advisors informed of new opportunities for your clients.

Start Capturing the Private Market Investments Opportunity 

Contact Sandro Wealth Management to discuss strategies for integrating private investments in your practice.

*“Why Private Equity Wins: Reflecting on a Quarter-Century of Outperformance.” Institutional Investor. March 24, 2025.

Disclosures:

Sandro Wealth Management, LLC (“Sandro Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Sandro Wealth and its representatives are properly licensed or exempt from licensure.

The above targets are estimates based on certain assumptions and analysis made by the advisor.  There is no guarantee that the estimates will be achieved.

The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Investing in private funds involves a risk of loss that each existing and prospective investor should understand and be willing to bear. Existing and prospective investors are reminded to read fully and carefully understand these risks as outlined in Offering Documents and to discuss these risks with the Advisor.

No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. All investments include a risk of loss that clients should be prepared to bear. The principal risks of Sandro Wealth Management LLC strategies are disclosed in the publicly available Form ADV Part 2A.