You read here that it’s important to find balance in an uncertain world. A balanced portfolio is a diversified portfolio, and as Harry Markowitz explained with his Efficient Frontier, diversity is the only free lunch in investing.
That’s why it’s somewhat alarming that so many young investors are opting out of balanced portfolios for alternative assets. That means private equity and credit. Now, some companies are suggesting clients reduce exposure to private equity and credit, while young people load up on the assets. Lu Wang explains in Bloomberg that the assets are often complex, costly, illiquid and uncertain, writing:
Many investors are opting into complex, costly, and often illiquid structures — even as the long-term payoff remains uncertain. Compared to tax-efficient ETFs, these alternative products tend to carry higher fees, greater opacity, and less liquidity. Blackstone’s flagship real-estate trust, for example, hit withdrawal limits during the 2022 interest-rate spike.;
With private equity and credit poised to trail public markets for a third year, JPMorgan Chase & Co. strategists recently advised their clients to reduce exposure to both assets. A separate academic study has labeled alts “costly and wasteful.” And Moody’s Corp. warned the push to open private markets to the retail crowd carries “systemic implications,” such as growing liquidity risks.
Yet none of this is deterring industry fans in the era of get-rich-quick antics amplified on social media from TikTok to Reddit.
If you read my series Private Equity Is the Next Big Thing Coming for YOU, you know that private equity has exhausted pension funds and institutional investors, and is now looking at harvesting the wealth of retail investors.
And despite the sales push, private equity returns might not be any better than those of publicly traded companies. Jack Shannon explains at Morningstar:
While it’s hard to compare private and public vehicles, some of the latter, such as interval and tender offer funds, have been investing in private assets for years. They provide time-weighted returns that can be benchmarked to public equity indexes.
The results leave a lot to be desired. As shown below, of the 14 private equity-focused interval and tender offer funds launched in 2022 or earlier, 11 underperformed the S&P 500 since their inception through May 2025 or their last reported return date—a number of them by a lot.
Action Line: When you want to talk about the benefits of a balanced portfolio of stocks and bonds, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
