Is Your Portfolio Missing This Key Ingredient?
Membership required
Membership is now required to use this feature. To learn more:
View Membership BenefitsFor decades, building wealth meant buying stocks and bonds, preferably diversified and held for the long term. That advice still holds.
But investors are asking a new question: Is a portfolio made up only of public markets enough?
From pension funds and endowments to high‑net‑worth investors and, potentially, retirement savers in 401(k)s—private assets are moving from the sidelines toward the mainstream.
In the late 1990s, more than 8,000 companies traded on US exchanges. Today, that figure is closer to 4,000 to 4,700—a roughly 50% decline.1
The drop isn’t because American entrepreneurship has slowed. It’s because companies stay private longer, backed by deep pools of private capital that lighten the pressure to list publicly.
For investors, that shift matters. A portfolio limited to public equities now captures a smaller slice of corporate growth2 than it once did.
Globally, the imbalance is even starker. There are 25 times more private, private-equity (PE) or venture capital- (VC) backed companies than public businesses, yet PE and VC together represent only 12% of the capitalization of global public-equity markets.3
The shift extends well beyond equity. Private credit has stepped in where banks pulled back, private real estate includes institutional assets that rarely trade publicly, and infrastructure—from data centers to renewables—is increasingly financed through long-term private capital.
Why private assets are entering 401(k)s
Today’s retirement landscape looks very different than it did a generation ago.
As 401(k)-style retirement plans replace traditional pension plans, access to private investments has changed as well. Pension plans often invested 15% to 25% of their assets in private markets such as private equity and real estate. In contrast, most 401(k) plans today invest less than 2% in these types of assets.
That may be starting to change. Target-date funds (TDFs), the “set it and forget it” investment options many people use in their 401(k) plans, now represent more than $3.5 trillion in assets. About $115 billion of that total includes some exposure to private equity (PDF) or private real estate,4 and the amount continues to grow.
Private assets behave differently than public assets. Characteristics include less liquidity, more complex fee structures, wider dispersion between top and bottom managers and valuation lags that can smooth volatility, but not eliminate it.
New structures such as evergreen funds, semi-liquid vehicles and professionally managed TDFs are making private assets operationally feasible.
For most investors, private assets work best as part of a diversified portfolio, accessed through experienced managers and sized appropriately for long‑term goals.
Private assets by the numbers: public vs private
Private assets are not a single category. Each plays a different role in portfolios and has grown relative to its public counterpart.
Private equity. Private equity and venture capital totaled slightly more than $11 trillion in assets under management at the end of 2023, compared with more than $87 trillion in global public-equity market capitalization.5
While smaller in aggregate size, private markets back significantly more companies, meaning investors focused solely on public markets may miss earlier-stage value creation as companies remain private for longer.
Private credit. Private credit now represents 7% of US debt outstanding and more than 20% of total US credit markets6 when non-bank sourced lending is included. Its structure differs from traditional bank lending and public debt markets, often offering higher yields alongside trade-offs such as lower liquidity and more complex structures.
Private real estate. The professionally managed global real estate market is valued at $13 trillion, while public real estate investment trusts (REITs) represent only about $2 trillion of US real estate holdings. In other words, most institutional real estate remains privately held, not publicly traded.7
Private real estate may show lower volatility and less correlation to stocks vs public REITs—though valuations move more slowly, often due to lower transaction volume.
Infrastructure. Similarly, most infrastructure assets—including airports, toll roads, renewable energy projects and data centers—are financed through private markets rather than public equities. Institutional investors often allocate to private infrastructure for its long-term contracted cash flows and potential inflation linkage, recognizing differences in liquidity compared to listed infrastructure companies.
The bottom line
Investors aren’t turning to private assets because public markets no longer work. They’re doing so because public markets no longer capture the whole economy.
Think of it this way: What if you needed specific ingredients for your favorite meal, and when you went to the grocery store, you found half the aisles were not accessible? There is no way you could get all the ingredients you need.
This is what public-only investing feels like—inaccessibility to key ingredients.
With more economic growth occurring outside public markets, portfolios built solely from public stocks and bonds may miss meaningful sources of return and diversification.
Private equity, private credit, private real estate and infrastructure are no longer viewed as “alternatives” by institutions—and they’re increasingly finding a place in long‑term wealth‑building strategies, including 401(k)s.
With millions of Americans depending on 401(k)s for retirement, it’s critical to thoughtfully strengthen the system to support long-term financial security.
Endnotes
- Source: “The Decreasing Number of Public Companies.” Meketa. September 2024.
- Source: “The shrinking public market: What investors need to know.” WTW. February 2025.
- Source: “How does the size of private markets compare to public markets?” HarbourVest. Data as of 2023/2024.
- Source: “401(k) Private Market Push Is Coming, Even if Adoption Starts Slow.” PlanSponsor.
- Source: “How does the size of private markets compare to public markets?” HarbourVest. Data as of 2023/2024.
- Source: S&P Global. As of 2023.
- Source: “Private Real Estate Investments vs Public Markets: Which Builds More Wealth? [2025]” Primior.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Investments in alternative strategies may be exposed to potentially significant fluctuations in value.
Commodity-related investments are subject to additional risks such as commodity index volatility, investor speculation, interest rates, weather, tax and regulatory developments.
Equity securities are subject to price fluctuation and possible loss of principal. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks.
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.
Infrastructure investments projects can be exposed to numerous risks that may not offer recourse to the project sponsor and investors. For example, delays in obtaining necessary permits or a shift in political or public sentiment could hinder progress or cause a project to terminate. Other risks that can impact an infrastructure investment include, but are not limited to: construction delays, environmental concerns, contract or labor disputes, or financial/default risks from a deterioration in a sponsor’s credit.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
An investment in private market investments is suitable only for investors who can bear the risks associated with them (such as private credit and private equity) with potential limited liquidity. Shares will not be listed on a public exchange, and no secondary market is expected to develop.
Real estate investment risk includes, but is not limited to, fluctuations in lease occupancy rates and operating expenses, variations in rental schedules, which in turn may be adversely affected by local, state, national or international economic conditions. Such conditions may be impacted by the supply and demand for real estate properties, zoning laws, rent control laws, real property taxes, the availability and costs of financing, and environmental laws.
WF: 9476963
IMPORTANT LEGAL INFORMATION
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton ("FT") has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
Franklin Templeton has environmental, social and governance (ESG) capabilities; however, not all strategies or products for a strategy consider “ESG” as part of their investment process.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Issued in the U.S. by Franklin Templeton, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com. Investments are not FDIC insured; may lose value; and are not bank guaranteed.
You need Adobe Acrobat Reader to view and print PDF documents. Download a free version from Adobe's website.
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Membership required
Membership is now required to use this feature. To learn more:
View Membership BenefitsSponsored Content
Upcoming Virtual Events View All
