Private assets are playing an increasingly important role in modern investment portfolios, offering potential for capital growth, income generation, risk diversification, and inflation protection. Although private assets in the past have been primarily limited to institutions and high-net-worth individuals, traditional barriers to entry are declining alongside the expansion of innovative investment vehicles and regulatory changes. 

According to S&P Global¹ and Preqin data, global private capital assets under management (AUM) reached approximately US$15 trillion in 2024, up from US$11.87 trillion in 2023—a material increase from US$2 trillion back in 2008. Furthermore, Preqin projects that global alternatives (encompassing private asset classes discussed in this article) could hit US$32 trillion by 2030. 

Given this increased attention and growth, it is essential for accredited investors (defined by financial thresholds set by the Canadian Securities Administrators) to understand both the benefits and risks of private asset investing. Recent events serve as a clear reminder of these risks: several major private credit fund managers capped quarterly withdrawals as investor withdrawal requests exceeded limits imposed by the respective funds. These withdrawal requests largely came from investor concerns over AI's potential impact on software companies. These instances underscore the importance of understanding the inherent realities of private assets, such as strict capital lock-ups, extended investment horizons, and the potential challenges of accessing capital quickly. In this article, we’ll explore private assets—including what they are, their main (alternative) asset classes, benefits, risks, and additional investor considerations.

What are private assets?

When most people think about investing, they often think of publicly traded assets, such as stocks traded on exchanges like the Toronto Stock Exchange (TSX) or bonds issued by governments and large corporations. Yet, a vast opportunity set exists in private market assets. 

Private assets are investments that are not publicly traded and are not available to the general public. Unlike most public securities traded on public exchanges, private assets are largely characterized by illiquidity—meaning they often lack an active secondary market and face contractual sale restrictions, making it challenging for investors to sell and access invested capital in a timely manner. However, investors are compensated for this lack of liquidity through a potential return premium.

Private asset classes

Private markets consist of an extensive investable universe and are generally included in a more broad asset class referred to as alternative investments. Some popular private assets include:

Private equity: Generally involves investing in assets that are not listed or traded on public exchanges such as the Toronto Stock Exchange. These investments typically focus on long-term growth with the potential for return enhancement and focus on making equity ownership investments in the assets.

Private debt: Involves lending to private companies through strategies such as direct lending. Capital can be delivered directly through a new debt issuance or through the purchase of existing loans and debt securities. Private credit typically provides investors with an enhanced yield or total return potential versus publicly traded fixed income.

Real assets: Investments in physical assets, often used to mitigate inflation risk and provide stable income streams. Subclasses include:

• Real estate: Investments in physical properties, including income-generating assets like offices, retail, and multi-family housing.
  
  
• Infrastructure: Investments in essential physical assets supporting economic activity and public services (transportation, utilities, data centres).