Private markets have grown into a valuable asset class, offering investors access to opportunities beyond traditional public exchanges. These markets, which encompass private equity, venture capital, real estate and private debt, provide unique investment avenues for those looking to diversify their portfolios and potentially achieve higher returns.
Although private markets come with certain risks, such as illiquidity and higher entry barriers, they continue to attract institutional and, increasingly, retail investors. In this article, we’ll break down what private markets are, how they work and how you can get involved.
What are private markets?
Private markets were established to help businesses raise capital without relying on public stock exchanges. They allow companies to secure funding from private investors, bypassing the regulatory burdens and short-term pressures of public markets.(1)
This system also gives investors access to alternative assets with higher potential returns. Over time, private markets evolved to support startups, real estate, private equity and other long-term investments. Today, private markets are some of the most valuable assets globally, with private funds managed by SEC-registered investment advisers reporting approximately $23.4 trillion in aggregate asset value as of Q2 2024.(2)
Private markets are investment sectors where assets are traded privately outside of public exchanges like stock markets. These markets include private equity, venture capital, private debt, real estate and infrastructure investments. Unlike public markets, private markets are generally limited to accredited and institutional investors, offering long-term investment opportunities with lower liquidity.
While private markets offer lower liquidity and longer investment horizons, public markets, such as stocks and bonds, are more accessible to all investors and have higher liquidity. Public markets are also subject to more regulations than private markets.(1)
Private markets include a variety of investment types, each with distinct characteristics and opportunities. Here are some of the main types:
Private credit. Loans provided to businesses or individuals outside of traditional banks, offering higher returns due to the increased risk.
Venture capital. Funding provided to startups and early-stage companies with high growth potential, typically in exchange for equity.
Private debt. Investments in debt instruments issued by private companies, providing returns through interest payments.
Private infrastructure. Investments in physical infrastructure projects like transportation, energy and utilities, offering long-term, stable returns.
Real estate funds. Investment vehicles focused on properties, either through direct ownership or real estate development projects, aiming for capital appreciation and income.
How do private markets work?
Private markets involve investments in assets that are not traded on public exchanges, such as private equity, venture capital, real estate and private debt. The lifecycle of private markets begins with companies seeking capital, typically from institutional investors, venture funds or accredited investors.
These investors provide funding in exchange for equity, debt or other ownership stakes. Over time, the company grows, and the investment may either be sold, generating returns, or continue as a long-term asset. Retail investor access to private markets is growing through platforms that lower minimum investment requirements and offer more transparent investment options.
Risks and rewards
Rewards
Potentially outsized gains. Private markets can offer higher returns than traditional investments due to their long-term nature and the potential for significant growth.
Exclusive opportunities. Investors gain access to exclusive, high-potential investment opportunities that may not be available in public markets.
Diversification. By investing in private markets, investors can diversify their portfolios with alternative assets, reducing reliance on public market fluctuations.
Risks
Illiquidity. Private market investments typically have limited liquidity, meaning it may be difficult to sell or access funds before the investment matures.
Higher fees. Private market investments often come with higher management and transaction fees, which can reduce overall returns.
Higher barrier to entry. These markets often require a higher initial investment and are typically restricted to accredited investors, making them less accessible to the general public.
Why private markets are gaining traction
Several key trends are driving the growth of private markets:
Technological innovation. Advancements in technology have enhanced transparency and accessibility in private markets. Platforms offering automated onboarding, user-friendly interfaces and transparent reporting are attracting retail investors seeking diversified portfolios.
Increased interest in alternative investments. Investors are diversifying beyond traditional assets, turning to private equity, private credit and real estate funds. The appeal of these investments has grown, especially as many traders have experienced significant losses during the pandemic. For example, day traders collectively lost $1.14 billion between 2019 and 2021, underscoring the risks of short-term speculation.(3)
Demand for diversification. To mitigate risks associated with market volatility, investors are allocating funds across various asset classes, including private markets. This strategy aims to balance portfolios and enhance potential returns.
These trends are also influencing retail investors’ participation. Innovative fund structures and platforms are making private market investments more accessible to retail investors, allowing them to diversify their portfolios beyond traditional assets.
For example, State Street Global Advisors, in collaboration with Apollo Global Management, launched the SPDR SSGA Apollo IG Public & Private Credit ETF, providing retail investors with access to a diversified portfolio of private credit assets.(4)
Top providers offering private market access
To invest in private markets, you will need a brokerage account or individual retirement account (IRA) with a provider offering access to these assets. Here, you can find some of the best brokerage accounts with which you can invest in private markets.
SoFi Invest® is a retail-friendly platform offering stocks, ETFs and some alternative assets. While not a dedicated private market provider, it grants access to select funds with private investments. Many options are open to all investors, though some require accreditation. Fees vary, with commission-free stock trading but higher costs for alternative assets.
Stock trade fee
$0
Minimum deposit
$0
Signup bonus
Get up to $1,000 in stock
SoFi Invest® is a retail-friendly platform offering stocks, ETFs and some alternative assets. While not a dedicated private market provider, it grants access to select funds with private investments. Many options are open to all investors, though some require accreditation. Fees vary, with commission-free stock trading but higher costs for alternative assets.
Pros
Access to exclusive opportunities
SoFi's user-friendly platform
Access to a financial planner
Private market funds available in SoFi IRAs and with its robo-advisor
Cons
High $25,000 minimum for most funds
Some funds require accreditation
Limited research tools
Available asset types
Stocks, Options, Mutual funds, ETFs
Account types
Alternative investing
Minimum deposit
$0
Signup bonus
Get up to $1,000 in stock
Cash sweep APY
0.01%
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees.
Investing in alternative investments and/or strategies may not be suitable for all investors and involves unique risks, including the risk of loss. An investor should consider their individual circumstances and any investment information, such as a prospectus, prior to investing. Interval Funds are illiquid instruments, the ability to trade on your timeline may be restricted. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA(www.finra.org) /SIPC(www.sipc.org).
There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event.
Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire investment Before trading options please review the Characteristics and Risks of Standardized Options
Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser.
Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see https://www.sofi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information
Up to $1,000 in stock. Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
SoFi Plus members can schedule an unlimited number of appointments with a financial planner during periods in which the SoFi Plus member meets the eligibility criteria set forth in section 10(a) of the SoFi Plus Terms and Conditions. SoFi members who are not members of SoFi Plus can schedule one (1) appointment with a financial planner. The ability to schedule appointments is subject to financial planner availability. SoFi reserves the right to change or terminate this benefit at any time with or without notice. Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov.
Robo Advisor: Automated investing is offered through SoFi Wealth LLC, an SEC-registered investment adviser. 0.25% fee is based on your account value. The wrap program fee may cost more or less than purchasing brokerage, custodial, and recordkeeping services separately.
Yieldstreet offers access to alternative assets like art, real estate and commercial investments. While most offerings require accreditation, the Prism Fund is open to all investors with a $2,500 minimum. The platform also supports retirement and entity accounts. However, investments are typically illiquid, and minimums vary, often on the higher side.
Minimum deposit
$10,000
Signup bonus
N/A
Yieldstreet offers access to alternative assets like art, real estate and commercial investments. While most offerings require accreditation, the Prism Fund is open to all investors with a $2,500 minimum. The platform also supports retirement and entity accounts. However, investments are typically illiquid, and minimums vary, often on the higher side.
Pros
Possible to invest in art, real estate and commercial offerings
Prism Fund is available to non-accredited investors with minimums as low as $2,500
Offers retirement and entity accounts
Cons
Most investments are highly illiquid
Most investments open only to accredited investors
The minimum to invest varies for each offering but is typically high
Available asset types
Real estate, Art, Other, Private credit, Venture capital
Titan is a wealth management platform offering human-managed portfolios, including individual and retirement accounts. Clients can earn a 4.97% yield on cash holdings. The platform requires a $500 minimum deposit and charges a $25 monthly membership fee. Notably, customer service is not available by phone.
Stock trade fee
$0
Minimum deposit
$500
Signup bonus
N/A
Titan is a wealth management platform offering human-managed portfolios, including individual and retirement accounts. Clients can earn a 4.97% yield on cash holdings. The platform requires a $500 minimum deposit and charges a $25 monthly membership fee. Notably, customer service is not available by phone.
Pros
Private market access through human-managed portfolios
Arta Finance is a digital wealth platform that offers accredited investors access to private and public market investments. The platform features an intuitive interface and provides a wealth of educational materials to assist users in making informed decisions. Additionally, Arta offers entry points that accommodate a wider range of budgets, with investments starting at $5,000.
However, it's important to note that Arta Finance is relatively new, so its track record and long-term performance are still developing. Furthermore, the platform offers investments that are often illiquid, requiring investors to commit their capital for extended periods.
Minimum deposit
$0
Signup bonus
N/A
Arta Finance is a digital wealth platform that offers accredited investors access to private and public market investments. The platform features an intuitive interface and provides a wealth of educational materials to assist users in making informed decisions. Additionally, Arta offers entry points that accommodate a wider range of budgets, with investments starting at $5,000.
However, it's important to note that Arta Finance is relatively new, so its track record and long-term performance are still developing. Furthermore, the platform offers investments that are often illiquid, requiring investors to commit their capital for extended periods.
Pros
Intuitive interface
A plethora of educational material
Offers entry points that fit a wider range of budgets
Cons
Minimum investment of $25,000
Only available to accredited investors
Arta Finance is relatively new, so its track record and long-term performance are still developing
Fundrise makes private real estate investing accessible with a low $10 minimum. It offers an easy-to-use platform and some of the lowest fees in the space. However, investments are highly illiquid, and fee structures can be complex. Management fees also apply, so investors should review costs before committing.
Minimum deposit
$10
Signup bonus
N/A
Fundrise makes private real estate investing accessible with a low $10 minimum. It offers an easy-to-use platform and some of the lowest fees in the space. However, investments are highly illiquid, and fee structures can be complex. Management fees also apply, so investors should review costs before committing.
Pros
Some of the lowest ongoing fees among private real estate investing platforms
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Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
How to invest in private markets
Follow these general steps to start investing in private markets.
Assess investment goals. Define your financial objectives to ensure private market investments align with your long-term strategy.
Assess your risk tolerance. Evaluate your comfort with potential losses or volatility to determine the level of risk you’re willing to take.
Assess liquidity needs. Understand your need for access to funds and consider how private market investments’ illiquidity may impact you.
Understand the asset types. Research various private market assets like private equity, venture capital and real estate to understand their potential returns and risks.
Research providers. Explore platforms that offer access to private markets, ensuring they meet your investment needs.
Check eligibility. Ensure you meet the criteria for investing in private markets, such as accreditation or minimum investment amounts.
Diversify your portfolio. Spread investments across multiple private market assets.
Evaluate fees and costs. Review the fees associated with private market investments
Monitor your investments. Regularly check the performance of your investments
Bottom line
Private markets present a compelling opportunity for those looking to expand their investment horizons. As retail investor access continues to grow and new platforms simplify the process, the landscape for private market investment is becoming more inclusive.
While the risks may seem daunting, understanding the asset types, the lifecycle of investments and how to assess opportunities can help you navigate this space effectively. Whether you’re seeking diversification, exclusive opportunities or potentially outsized gains, private markets offer a world of possibilities for the savvy investor.
Frequently asked questions
What is the difference between private and public markets?
Private markets involve assets traded privately, with limited access, while public markets involve assets traded on exchanges and are accessible to all investors.
Who can invest in private markets?
Typically, accredited investors, institutional investors and, increasingly, retail investors through specialized platforms; for example, private investments with Arta.
Shane's career started with the US Department of Defense where he performed research for 8 years. He then studied philosophy and became fascinated by the ways in which technology and finance can consolidate to impact the world's socio-economic order. To date, he has written hundreds of articles with various insights into digital assets, trading, investing, and the ways in which technology can be used to further optimize the stock trading and settlement processes. His work has been featured in Yahoo Finance, Nasdaq, Bitcoin Magazine, Investing.com, Tokenist, and others. See full bio
SoFi’s Roth IRAs stand out for their low trading costs and access to human and robo advisory services.
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