94% of Investors Upping or Maintaining Private Market Allocations — Evening Brief – 02.20.25
Research has uncovered an emerging investment paradigm where private market investments are evolving from specialized alternatives to core portfolio components. Historically, private market investments, such as private equity, venture capital, real estate, and infrastructure, were considered specialized alternatives primarily accessible to institutional investors or high-net-worth individuals. However, research indicates that these assets are now evolving into core components of a broader range of investment portfolios, including those of retail investors.
According to private market investing platform Yieldstreet, there is a “fundamental transformation” underway in how retail investors approach and invest in private market opportunities. This shift is particularly pronounced among investors using digital investment platforms, who demonstrate distinct preferences across asset classes and higher adoption rates of diversified private markets strategies.
The research underscores that portfolio diversification is the primary motivator for investors (64%), particularly those with over $1 million in investable assets, when it comes to allocating capital to private markets. Generating higher returns is the second most important motivation for these investors (53%). Private markets often offer higher yield potential compared to traditional investments, which is appealing in an environment where interest rates may be low or public market returns may be volatile. Another key reason for investing in private markets is the reduced correlation they have with public markets (27%).
The research reveals an important shift in how individual investors are funding their private market investments, signaling a new approach to portfolio construction. The key takeaway here is the growing use of brokerage accounts by investors as the primary source of capital for private market investments.
Yieldstreet highlighted that 59% of D2C (direct-to-consumer) private market investments are funded through brokerage accounts. A large portion of this funding comes from online platforms (37%), reflecting the growing importance of digital tools in providing retail investors with access to private market opportunities.
Traditional brokerage firms still play a significant role in facilitating private market investments (22%). The remaining 41% of private market investments are sourced from savings and checking accounts. This shift in funding sources reflects how individual investors are rethinking their portfolio construction strategies. Rather than keeping private and public market investments in separate buckets, they are increasingly blending the two within a unified investment strategy.
The data illustrates how digital platforms are reshaping investor preferences, particularly in relation to asset class demand. One of the most notable findings is the significant difference in interest in infrastructure investments between platform users and non-users. Among digital platform users, 22% expressed interest in infrastructure investments, compared to just 8% of non-users.
This suggests that digital platforms are enabling investors to explore and engage with asset classes that may have previously been outside their consideration set. Infrastructure investments, such as those in energy, transportation, and utilities, are often seen as stable, long-term assets with attractive risk-return profiles, but they were historically less accessible to the average investor. The rise of digital platforms is making these investments more visible and accessible to a wider audience.
“As financial firms rush to bring private markets to self-directed affluent retail investors, we wanted to challenge common assumptions about this audience — including our own,” said Michael Weisz, Founder and CEO of Yieldstreet. “What we found is that when provided access to private markets, investors are actively diversifying between their public and private market accounts to make sophisticated investment decisions across asset classes.”
“The platforms that succeed will be those that deliver the intuitive, digital experience investors have come to expect, paired with institutional-caliber opportunities – enabling them to build diversified portfolios over time,” Weisz added.
Overall, this evolution of private markets from niche alternatives to mainstream portfolio components reflects a broader trend of increased investor sophistication and wider access to financial products. As this trend continues, private market investments are likely to become an essential part of well-rounded portfolios for both retail and institutional investors.
“The Next Wave” study was conducted from November to December 2024. The research combined a survey of 388 accredited and non-accredited US individual investors with expert interviews of industry subject matter experts and providers in the retail alternatives market.