Insights

To what extent do private market investments differ from public market investments, and are they suitable for all investor groups?

When we talk about private equity, we are talking about equity investments, i.e. investments in companies such as stocks. Unlike public markets, however, the companies in which you invest are typically not listed on the stock exchange, meaning that the equity investment is not publicly tradeable. This also applies to private debt. These are debt investments which, unlike traditional corporate or government bonds, are not publicly tradeable.

Private market investments are generally suitable for long-term wealth accumulation for all investors. However, they are often only available to wealthy or institutional investors. This is because, as already explained, they are not easily tradeable and are therefore illiquid. Private market investors should therefore have a long-term investment horizon and, above all, the financial resources to offset these liquidity risks. We therefore recommend seeking detailed advice on such investments

What added value do investments in private markets offer?

Private market investments open up large parts of the economy to investors that are not represented on public markets and stock exchanges. For many companies, the effort involved in listing on the stock exchange and complying with extensive disclosure requirements is too high. This is particularly true given that there are attractive alternative financing opportunities on the private markets. In recent years, we have seen a shift in value creation away from the stock exchanges and towards private markets. As an investor, private market investments give me access to this segment, which in turn has a positive effect on my portfolio.

What is the reason for this positive portfolio effect?

Private market investments allow investors to further diversify their portfolio, i.e. distribute risks more broadly and thus achieve a target return with lower risk or a higher return with the same risk. The less frequent valuation of investments also means that the hysteria we see from time to time on the stock market is not reflected in the prices of private market investments, or only to a lesser extent. In addition to illiquidity, this can help investors hold on to their investments even in difficult phases. However, this should not give the impression that the underlying economic risk is lower than that of publicly traded investments. An equity investment remains an equity investment, whether listed on the stock exchange or not.

In addition to diversification, private market investments can also offer investors additional return potential. In addition to the illiquidity premium, i.e. a return premium for the fact that the investments cannot be liquidated at will, investors have the opportunity to generate a so-called economically explainable excess return by investing in private equity funds, for example. In their role as strategic and financially strong partners, private equity funds often implement ambitious growth strategies in companies and can, in turn, distribute attractive returns to their investors.

Your team recently expanded its cooperation with BlackRock to include private market investments. You now enable investments via ELTIFs. What is this new vehicle for private market investments all about, and what advantages does it offer investors?

ELTIFs aim to democratise access to private markets. With this fund structure, the European Union has created a regulatory framework that now enables more private investors to invest in private assets. The main political aim was to make it easier for small and medium-sized enterprises to access financing, but also to mobilise capital from smaller investors by lowering the minimum investment amount. In addition, we believe that ELTIFs offer a number of interesting features, which we like to refer to as convenience factors. Unlike traditional closed-end funds, ELTIFs are booked in the custody account like a classic mutual fund. This means that there are no additional identification requirements, no deviating tax characteristics and, for most of the funds offered, no irregular capital calls. Investors are therefore invested directly. In addition, the current trend is clearly towards semi-liquid funds, i.e. “Evergreens”. This means that, in contrast to closed-end funds, liquidity windows are offered on a regular basis and the fund does not usually have a limited term.

Looking ahead: How might the market for private investments develop over the next few years? How do you assess the development of the ELTIF market in Germany and Europe?

More than 230 funds in Europe are now authorised as ELTIFs, and many providers are still in the starting blocks. Some funds are in the development phase and are therefore still subject to longer-term sales restrictions. Furthermore, no uniform standards have yet been established for the structuring of these funds, as is the case with traditional mutual funds. The pioneers in the use of ELTIFs are Italy and France. These funds established themselves there at an early stage. In addition, digital platforms operating across Europe have recently integrated ELTIFs into their product range. By August 2025, the ESMA had already registered as many ELTIFs as in all of 2024.

I therefore expect ELTIFs to become increasingly popular in Germany as well, and that their structuring standards will converge with those of mutual funds. In our view, ELTIFs offer many advantages for long-term wealth accumulation and the development of individual retirement provisions. In a few years’ time, investors should be able to choose from a sufficiently large number of established and competing ELTIFs to build a diversified portfolio component. Alternatively, they can also opt for a so-called multi-asset ELTIF. These combine various segments such as private equity, private debt, infrastructure and real estate in a single fund. Some such vehicles have recently been launched or are currently in the process of being established.