The next frontier in investing isn’t a new asset class—it’s a new way of giving people access.

As the number of public companies shrinks and private markets expand, advisors and investors are asking how to sensibly include private equity, private credit, private real estate, and infrastructure in portfolios.

The rise of private markets is impossible to ignore, we explain in Morningstar’s 2026 Outlook. Since 2015, global private fund assets under management have nearly tripled.

Read more from Morningstar’s 2026 Outlook.Expanding the Investment Universe

Over the past 25 years, the number of listed US companies has roughly halved, even as global private-market assets have surpassed $15 trillion. That shift means most investors are missing a growing share of value creation.

Adding private assets to a portfolio can help restore balance. Exposure to earlier-stage companies and income-producing private credit introduces different sources of return and diversification. Morningstar’s Does Private Equity Enhance Retirement Investment Outcomes? (2023) analyzed two decades of pension plan data and found that private-equity funds historically delivered strong performance, averaging around 16% in pooled annual returns from 1998 to 2020, compared with roughly 11% from the S&P 500 over the same period.

Another study, PitchBook’s Are Private Markets Worth It? (2025), found more mixed results, as shown in the table below. From 2000 to 2024, PitchBook found that adding private-equity buyouts and private debt modestly improved portfolio returns, while private real estate slightly reduced returns but lowered volatility.

Accessing Private Assets

The challenge has never been the value of private markets, but rather the format and liquidity challenges. Traditional limited partnerships require capital calls, decade-long lockups, and patience through a “J-curve” of early negative returns—unfamiliar features for those accustomed to daily-valued vehicles like mutual funds and exchange-traded funds. Translating those structures into something the Securities and Exchange Commission can approve and oversee has proved to be the harder part of the innovation challenge.

And while private investments were once reserved for institutions and wealthy investors, access is growing rapidly for the average investor.

Semiliquid (or evergreen) funds—including interval funds, tender-offer funds, nontraded business-development companies, and nontraded REITs—offer perpetual access to private assets with periodic redemptions. Assets in semiliquid funds totaled almost $450 billion through June 2025, up 16% from 2024 and 77% since 2022.

Retirement plans offer the next frontier. A flood of collective investment trusts is expected in 2026 to capture rising demand for private assets, aided by a recent executive order promoting their inclusion.

Simulated Outcomes: The Morningstar View

Preliminary simulations from Morningstar’s Wealth Forecasting Engine and private-market modeling framework suggest that adding 5%–10% diversified private exposure to target-date glide paths can raise median lifetime returns by 20–40 basis points annually.

These models incorporate PitchBook private-market indexes to better reflect the yield, spread, and diversification characteristics of private credit and equity than legacy closed-end fund data. The evidence supports what the theory implies: Measured allocations to private assets can enhance long-term outcomes when embedded into diversified, perpetual vehicles with prudent liquidity management.

Adding Private Assets to a Portfolio: Balancing Cost and Transparency

Evergreen access does not erase the need for governance. Semiliquid vehicles remain more expensive than traditional mutual funds, often 2 to 3 times higher when incentive fees are included. The difference widens further when compared with the average ETF.

While higher simulated returns are promising, investors, advisors, and fiduciaries must balance them against higher costs, less transparency, and lower liquidity. High fees can easily offset a performance edge in private markets, harkening back to the infamous title of 1940 book Where are the Customers’ Yachts? Investing with an asset manager known for stewardship can help mitigate the risk of limited transparency and liquidity.

Private Credit: Yield and Diversification

Private credit has become the most practical on-ramp for investors. These funds generate consistent income—often floating rate—and distribute cash monthly or quarterly. Nontraded BDCs (the dominant structure) and interval funds have attracted most inflows, thanks to their combination of yield and structural liquidity.

Morningstar’s models show that private credit’s lower equity beta and moderate leverage (nontraded BDCs are afforded higher leverage limits than interval funds) create diversification benefits relative to high-yield bonds and leveraged loans—attributes well-suited to investors seeking incremental yield.

The practicality of private credit doesn’t translate to private equity. Semiliquid funds investing in private equity often gain exposure through special-purpose vehicles, or secondary funds, not by directly investing in private companies. This can result in additional costs and performance fees that may not show up in expense ratios, making it difficult to evaluate a strategy’s all-in cost. Likewise, secondary investments are typically bought at a discount and marked up to net asset value, creating positive performance on paper that may not be realized for investors. Investor caution and due diligence are essential.

Real assets such as real estate and infrastructure may benefit from a less-liquid structure than traditional mutual funds and ETFs. Still, cyclical outflows put $49 billion Blackstone Real Estate Income Trust on the liquidity ropes and forced Bluerock Total Income+ Real Estate to convert into a listed closed-end fund so that investors could access liquidity—likely at a discount. Investors must acknowledge that they may not be able to sell shares during stressed markets.

Looking Ahead: A Menu of Options

Evergreen private-market funds have grown in size—and in importance—to financial markets. Investors seeking access to private markets will find an ever-growing menu of options. Bringing evergreen private markets into defined-contribution plans marks one of the most significant design shifts since the advent of target-date funds.

Morningstar’s ongoing research—including new semiliquid Medalist Ratings and fund data analytics—will continue to refine how private assets fit within investor portfolios. As capital markets evolve, the same principles apply across all investor types: prudence, diversification, and transparency.

The convergence of private and public markets is redefining how portfolios are built. Whether for retirement savers, institutions, or individuals seeking long-term growth, the goal remains the same—to help investors capture a fuller share of global growth while maintaining discipline and trust, the cornerstones of investing.

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