Private Markets: A Practical Guide for Investors

Speaker 1 – 00:00
There’s a reason why high net worth. Top investors are doing this and it’s not available to everybody.
Speaker 2 – 00:05
If you look at the investment landscape out there, you essentially have two options, public markets or the private
markets.
Speaker 1 – 00:10
Well, if you’re a private company that’s doing really well and you’re like a cash cow machine, why go public? And
then unfortunately just a normal investor wouldn’t have access to that, you’re going to get crumbs left on the table.
Private markets are no longer reserved for institutions. That’s where we come in. That’s why we developed this
portfolio. If you have the on your side, then this could be a fit for you. Private investments such as private credit,
private equity, friends and family deals. These are not appropriate if you are starting out building your wealth.
However, if your net worth is approaching 10 million plus. Private credit, private equity have very strategic
advantages to them. EP, give us a lay of the land on what is private credit? What is private equity?
Speaker 1 – 00:54
And it’s definitely not what most people think about their friend who just started a company and they’re suddenly in
a private equity because they’re through 50,000 a day. Let’s go high level simplicity. But give us the real lay of the
land.
Speaker 2 – 01:06
Sure, yeah. So taking a step back. So if you look at the investment landscape out there, you essentially have two
options. You can invest through the public markets or the private markets within the public markets. This is what
we know. This is the S&P 500. These are public stocks. It’s the Amazons, it’s the American Eagles of the world. We
know this quite well these days. The public fixed income or the public bond markets are bank loans, corporate
bonds, community bonds, things like that. So essentially what, you know, what we’re talking about here is
ownership stakes. That’s equity, that’s stocks, and then lending, investing, and that’s loans. That’s bank loans and
that’s bonds. So again, that’s the public side. On the other side of the wall are private investments. Matt, what
would you say is the size of the public markets right now?
Speaker 1 – 01:48
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Yeah, so we look at the total US ST market as of mid 2025, it fluctuates between 62 to 63 trillion dollars. It’s pretty
crazy. The S&P 500 alone is 53 trillion. When you think about why is it hard to beat the s and P500? Well, it’s 80% of
the and just in the 500 companies and there’s thousands of companies listed. That’s 80% of the total market.
Speaker 2 – 02:09
Well, that’s why The S&P 500 is a good indices.
Speaker 1 – 02:12
That’s why hedge funds can’t beat the SB500. That’s why a lot of private markets probably can’t beat this. Actually
some private markets have, but that’s why we’re going to talk today. But it comes with a lot of risk, which is the
whole premise of this pod. But so private markets, you know, the data is not as easily accessible. So we’re looking
about 12 trillion into 2023 and then it’s expected to grow over 15 trillion in 2025, 18 trillion by 2027. So it’s
definitely, you know, growing. Just to be specific about private markets, we’re talking about Blackstone, you know,
you can name some of the other big firms. Exactly.
Speaker 2 – 02:42
Firms, yeah. So for reference, so the public equity markets at 60 trillion plus or minus, I believe the public debt
market for so non governmental debt, it’s about 8 to 10 trillion, something like that. And then flipping over again to
the private investments is anything that’s not essentially sanctioned by some regulatory body to sell to the public,
to sell to retail investors. Private investments are, I’m speaking generally here, but only allowed to be purchased by
accredited investors or folks with significant net worth and liquidity and incomes as well. So what does that mean?
So similar we on the public side we have public equity and public credit. On the private side we have private equity
and private credit.
Speaker 2 – 03:16
We don’t typically use those terms like that, but we know private equity and private credit, those are kind of more
popular over the last 10, 15 years, something like that.
Speaker 1 – 03:23
I think this will help put in an overall context, if you look at the total financial assets of the US you’re basically
looking at this is as of quarter one of 2025 according to the Federal Reserve. So you got financial assets In
America about 129 trillion. You have non financial assets of 61 trillion and then you have liabilities of about 21
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trillion, so leaving about 159 of net worth. So you look at the deficit in the US and you look at, okay, well what are
the assets in Americans hold? It’s still scary. It’s not nearly as scary because that far exceeds the deficit. So we’re
looking at that 159 of trillion of net worth in Americ. And then you look at where the private equity markets, it’s less
than 10%. Right. So this is a very exclusive, scarce opportunity.
Speaker 1 – 04:02
When we’re talking about true private equity and private credits like in the US is I think it’s between one and a half
to three trillion that’s gonna, that’s even growing. But this is, there’s a reason why high net worth top investors are
doing this. And it’s not available to everybody because it is a small subset, less than 10% of total assets.
Speaker 2 – 04:19
Yeah, but it’s growing, right?
Speaker 1 – 04:20
Absolutely.
Speaker 2 – 04:20
And it’s growing fast. So why is this important? Because in the past, in order to access robust capital markets,
companies, growth companies especially needed to go public. They needed IPO to access the retail markets to
and capitalize with billions of dollars if they needed it. There is a lot of capital held in again on the other side of the
wall in the private markets. Now what that means is that a lot of the companies, a lot of companies these days do
not have to go public, which is fine for them because they don’t have these onerous regulatory restrictions. They
don’t have to report earnings quarterly. They can choose their investors. There’s all these reasons.
Speaker 1 – 04:53
And as you go through exactly. To go to hit the IPO and then after all the stringent regulation and compliance
oversight, there is still that in the private markets it’s not nearly as much.
Speaker 2 – 05:05
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It’s a tiny fraction of the work that it takes in the cost. So companies are staying private longer and that’s great for
them and their employees generally, but that’s not so great for individual investors. Let’s call it the top 50% of US
households. Companies like SpaceX, OpenAI Stripe, there’s a bunch more that are 15, 20 years ago would
absolutely be public companies today they are not because they don’t have to access those markets. Investors and
money managers would like to have exposure to those companies, but they can only get that through the private
market. So that’s why this is important to anybody in the industry, to our higher net worth clients. Yeah. Did I miss
anything there?
Speaker 1 – 05:39
No, no, absolutely. I think that’s a good high level for sure. So what exactly. Like, let’s just do basics. Like so private,
when you go purchase a stock that’s publicly traded, you’re now an owner, a part owner of that company. When you
approach a bond that’s publicly traded, you are letting that company borrow money from you and they’re returning
your interest at a certain cadence and whenever that matures, they’re recording your principal. Those same
concepts apply. Private equity with the similar to a public stock, just on a private level. Private credit would be
similar to a bond, just on a private level. So let’s go a Little bit deeper on those. Why do these exist and why have
the returns in the short period of data that we’re looking backwards, why have they been so good?
Speaker 2 – 06:21
Okay, so this is a big topic. I’m gonna try to, I’m gonna try to streamline it. Why they exist. Like in any market there
can be holes in them. So in the capital markets, certain companies had access to public funds, to public money, to
public investors. Others didn’t for various reasons. We don’t need to get into that now. They had access capital via
the private markets. And this is when firms like kkr is the big one. Other firms kind of sprouted up in the 80s. This
is the big kind of deals with RJR Nabisco and the leveraged buyout firm starting to borrow money and invest
privately. And there’s a whole story behind that. We don’t need to get to that. Why is this important today? Again,
it’s because a lot of these companies are not going public.
Speaker 2 – 06:55
Therefore the vast majority of the investor base, that is the vast majority of our clients do not have access to the
open AIs to the SpaceX, the X AIs of the world. Private markets can offer that access in various ways. And it’s not
just those super sexy, super large companies that are growing like crazy and that we all know and use on a day to
day basis. It’s also, you know, eight track company roll ups, it’s you know, restaurant conglomerates.
Speaker 1 – 07:19
It’S all these dentist practice. Yeah, Jersey Mike’s.
Speaker 2 – 07:21
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Anything?
Speaker 1 – 07:21
Yes, Jersey Mike’s, it’s sports teams.
Speaker 2 – 07:25
Sports is a big one as well. So what that leads us is to, it’s essentially a diversification play where folks with capital
investors don’t have access to those public companies. So how do you get that? It’s via the private markets. And to
your point earlier, private equity, again, is this taking ownership? Just like public equity, you take ownership at a
company, it’s just, it’s not widely available to the public. Private credit is the same thing. You’re lending money, but
it’s not via banks or VI Investment banks as well. So why is that important? Because the private markets offer
access to certain high growth companies that are not available in the public markets as they stand today.
Speaker 1 – 07:57
Just to be clear. Like we recommend, I would personally recommend that do keep like 90 of my net worth in public
markets. I mean, and we’re not talking about like brand new like sexy IPOs, we’re talking about like that S&P 500
type, you know, large cap, mid cap, small caps and international exposure of big companies that have proven, you
know, consistent results and you know, diversifying under that. The attraction IPO now unfortunately is almost like
a, a wealth transfer unfortunately of poor people, rich people, if you think about it, because like a company ipoing
right now and literally the last couple years have shown this. I don’t know the stats on this, but it’s like we did this
before and it was like over two thirds of the company that IPO like lost a significant from their IPO price. These
companies were private initially.
Speaker 1 – 08:43
A lot of high net worth investors put into them. They grew exponentially. Now they going on the public markets at a
high price. All the lower middle class people are like, oh, I can get in on xyz. They’re putting the money in. The rich
people are offloading their profits after a time period. Then the thing crashes. And then the poor people that put
their entire net worth have now like lost even what they had. So when you look at private markets that stay, it’s like
a, if you’re a private company, why would you go public? Well, maybe you need to get chips off the table for your
original investors. Well, if you’re a private company that’s doing really well and you’re like a cash cow machine, why
go public, Right? Yep. And then unfortunately, just a normal investor wouldn’t have access to that. Exactly.
Speaker 1 – 09:22
So that’s my kind of two cents on that. So you have to be really careful because as a normal investor you’re not
going to get, it’s kind of like the bond market. You’re going to get crumbs left on the table. But there are funds,
there’s conglomerates, and this is what we’re, we’ve developed DWA from a private equity and private credit
standpoint where you’re pulling your money with billions of dollars. So you’re actually getting the good
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investments, the good companies that are staying private. The downside of this is really liquidity. So this is not
giving your friend 50 grand because of this tech startup or a new drug, a pharmaceutical, which has to go through
all kinds of regimented FDA approval.
Speaker 1 – 09:57
You’re putting money into companies and typically private equity, you know, they have every three to five years
they’re going to want to like get astronomical returns and then turn it around. And now the company’s even set to
do greater and another private equity company will come in with these kind of funds. I mean, you’re not going to
see returns until the life cycle of these deals. Occur, you know, maybe it’s three to five years. The downside if you’re
an investor of going into this kind of portfolio, the reason we recommend is like if you’re 10 million plus, generally
speaking your equity needs are not the same as someone that has like a million dollars of liquid net worth. That’s
why we’ve set our minimum at 10 million plus.
Speaker 2 – 10:28
Yep.
Speaker 1 – 10:29
It comes with higher risk but it also comes with an expectation of higher returns. And your, the trade off is liquidity.
You know, you can’t get the money like that. Like you could if you sell it sold like Tesla stock or Apple stock. You
have to wait it out. That’s the trade off is really the liquidity for the higher returns. The higher returns aren’t
guaranteed. But historically some of these like private credit, especially compared to the public bonds have
crushed it. Like even the fees can be pretty high on this stuff. Because if you’re a private company and you’re, you
need capital and you don’t want to give equity away, well maybe you’re handing out a 12% interest rate for five
years and that’s a no brainer for an investor.
Speaker 1 – 11:06
Is like I can get 3% in the bank or 12%, that’s not a for sure deal. But it’s likely this company is doing well. And if
you’re that company, you’re like I don’t have to dilute my equity. We can, we’re, I mean look at the profits we’re
growing. Of course we can afford a 12% interest rate. So that’s just like high level concept. And why we put the
guardrails around, why we’re only recommending this to clients. And within that portfolio it’s a 15 ratio. So for
example, if you’re an 80:20 investor, 80% of your money’s in equities. You’re going to have 12% in private equity
fund, 3% in the private credit fund. We’re also going to have an overlay specifically mirroring those.
Speaker 1 – 11:41
So if you do need liquidity, if you’re retired, that we don’t have to sell specifically to that private equity or private
credit fund. So we can allow the life cycles to occur as well. Yep. And if you’re 100 0, like 100 equity, 0% bond
investor, then all 15% of that would be in the private equity fund, 0% in the private credit fund, just as an example.
So that’s a high level overview of how this works. I want to go into more detail. Private equity is not a friends and
family startup. This is not a private credit, it’s not angel investing. We kind of talked about this internally. You did
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this like chart, but walk us through that, like from the left to right as far as the stages and the risk versus reward
factors.
Speaker 2 – 12:19
If you think of investing as a continuum of options and it’s generally thought it was like a spectrum of risk and
return. So if I can sum up finance and investing into one kind of slogan, it’s risk versus return. So the more risk
you’re willing to take on the higher returns that you could expect. Like you mentioned earlier, right? On one end of
the spectrum is cash and cash like securities like Treasuries for example, very low risk. In fact, you know, you could
argue that it’s no risk, but the returns are quite low. On the other end of the spectrum, it’s maybe something like a,
like I would never recommend this, but a, a crypto coin, right. Where Incredibly high risk but you know, potentially
incredibly high returns. You know, we’re talking a thousand percent in a day or like that.
Speaker 2 – 12:55
On that spectrum I would put public equities, the large MAG7 or S&P 500 stocks somewhere, let’s call it the 80th
percentile, somewhat high risk in terms of volatility, but also you’re expecting 8 to 10% returns per year. Between
cash and those stocks. I would say we would put somewhere your average corporate bond, right. You know, let’s
say Unilever is a borrower, right. The risk is fairly low, but they’re only going to yield 4, 5, 6% right now versus
treasuries which are, you know, 4, 4, 4 and a half, something like that. So on that spectrum it starts low risk, low
return all the way up to high risk, high return. Where do you think we slot in private credit, private equity on that
continuum?
Speaker 2 – 13:29
Because then adding this exposure to EWA potential EWA client portfolios, really it comes down to like additional
diversification on that spectrum, so to speak. So where would you say that.
Speaker 1 – 13:40
If you’re a, a client that hasn’t developed financial benefits under 10 million, I would put private credit and private
equity at higher, the highest risk. Even both of them? Even private credit? Absolutely. More than S&P 500. Just
because like you as an individual needing that in the timeframe, it’s not intended to, is probably pretty high. Now if
you’re a high net worth investor and you’ve got time on your side and you’ve got the reality of you don’t need this
money in any given time in the near term, in five, 10 years even, I would put private credit probably at or right below,
like long term stock investing and then private equity definitely above that. As far as more risk, more return.
Speaker 2 – 14:14
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Yep. Okay, I would agree. So what does that mean for our clients with eight figures or more of liquid net worth?
Speaker 1 – 14:21
Yeah, I’d say private markets are no longer reserved for institutions. They require institutional discipline. That’s
where we come in. That’s why we develop this portfolio. I’d say secondly, you know, if you’ve already won the
wealth game, this isn’t more risk. It’s a different kind of risk. It’s smarter risk. And that’s again where the portfolio
comes in. And then third is if you have the liquidity game, the timeframe game on your side, then this could be a fit
for you. And we’re gonna, you know, for existing clients or new clients, we’re gonna walk you through. And you
know, we’re not gonna recommend this for everyone. This is an option that we believe is a fit for a certain kind of
clientele. And if you’re interested, please reach out and we’ll walk you through if we think it’s appropriate for you.
Speaker 2 – 14:55
Yeah, absolutely.
Speaker 1 – 14:56
Well, thanks for joining us, everybody, and we’ll catch you next week.