What are private markets?

Your ETF savings plan has been running for years, spreading your money across the world's major listed companies. Yet, the family business that has been manufacturing packaging machinery for three generations is missing, as is the AI company that has not yet gone public. All of this is part of the private markets: investments that are traded outside of the stock exchange.

The importance that major investors place on this part of the economy is demonstrated by KENFO, the German state fund for financing nuclear waste disposal. At the end of 2025, 14.3 per cent of its assets were in unlisted investments, and this is expected to rise to around 30 per cent by the end of 2028, depending on market conditions (KENFO, as of 31 December 2025). We discuss why a state fund plans in this way and what questions can be applied to a private portfolio in episode #69 of our podcast, Diversify.

Private markets in brief

• Umbrella term for investments that are not traded on a stock exchange
• Key asset classes: private equity, venture capital, private credit, infrastructure
• Valuation at fixed intervals, often quarterly
• Investment horizon usually several years
• Routes for private investors: primarily funds, for example ELTIFs as a legal framework, sometimes with an evergreen structure
• Risks: limited liquidity, valuation risk, higher costs than index funds, losses up to a total loss of capital

What are private markets?

Private markets encompass all investments in companies, loans and tangible assets that do not pass through a stock exchange. The counterpart is public markets: shares, bonds and ETFs that you can buy and sell every trading day at a publicly visible price.

In the private market, buyers and sellers meet directly. A private equity fund buys a company from its founder, and a credit fund finances a medium-sized business without going through a commercial bank. The parties negotiate the price, and the fund subsequently revalues its holdings at regular intervals. Our overview shows who is on the other side, from large fund houses to pension funds, in the players in the private markets.

How private markets differ from the stock exchange

You can find a detailed comparison in the article public vs. private markets. For your portfolio, four points are particularly important:

• Trading: You can sell a share in seconds. Depending on the fund, you may only be able to return a stake in a private markets fund on specific dates and under certain conditions.
• Valuation: The fund determines its net asset value (NAV) at fixed intervals, for example, once a quarter.
• Influence: Private equity managers often sit on the supervisory boards of companies and work on strategy and management over a period of years.
• Information: Publicly traded companies publish quarterly figures for everyone to see. Private companies report to their investors, with little information reaching the public.

What this means for you: Private markets require patience and a different expectation of liquidity compared to your ETF portfolio.

The four major asset classes

Private Equity

Private equity refers to investing in non-public, usually established companies. In a classic buyout, a fund acquires a majority stake in a company, develops it over several years, and subsequently sells it to another buyer or via an initial public offering (IPO). The basics are explained in our article What is private equity?. Incidentally, shares in existing funds can also change hands before they expire on the private equity secondary market.

Venture capital

Venture capital finances young, fast-growing companies. Many of these fail, but a select few grow so significantly that they cover the losses of the others. This is precisely why venture capital funds diversify broadly and often remain invested for ten years or more. How you can invest in this asset class and the role that late-stage funding rounds play before an IPO is covered in our venture capital guide.

private credit

Private credit involves lending outside of traditional banks. Funds lend money to medium-sized companies, often for acquisitions or growth, and receive ongoing interest in return. The primary risk is that a borrower may be unable to repay the loan. You can read more about this in our private credit guide.

infrastructure

Behind every video conference is a data centre; behind every electricity bill is a grid. Infrastructure funds invest in such assets: energy, fibre optics, transport, and data centres. Revenue is often based on long-term contracts or regulated fees, which can make the income from individual projects more predictable. Our guide provides an overview: Guide to infrastructure investments.

Hedge funds are classed as alternative investments and are often mentioned in the same breath as private markets. However, they primarily trade in liquid markets and follow their own specific strategies, such as long/short.

How retail investors can invest in private markets

Retail investors rarely have the opportunity to invest directly in a private company, as such holdings require high minimum investment amounts and independent due diligence. Funds that pool the capital of many investors therefore pave the way for private market investments. You will come across two terms repeatedly in this context. ELTIF is the EU's legal fund structure, while evergreen describes the design of a fund that continuously accepts new capital. A fund can be both at the same time, such as an ELTIF with an evergreen structure.

ELTIF

The ELTIF is a European fund structure for long-term investments. With the reform ELTIF 2.0, which has been in force since 10 January 2024, the EU has significantly lowered the barriers for retail investors. The market has been growing rapidly ever since: by the end of 2025, ELTIFs across Europe were managing at least 34.0 billion euros, an increase of 55 per cent compared to the previous year (Scope, ELTIF study dated 26 March 2026). Our guide explains how an ELTIF is structured and when redemptions are possible overview of ELTIFs.

evergreen funds

Evergreen funds are designed to be continuous: they accept new capital on an ongoing basis over a long period, and many provide for redemptions at specific dates, often with upper limits. The duration and redemption rules that apply are set out in the individual fund's documentation. In contrast, with classic closed-end funds, you commit to an amount that the manager calls up over several years, and you generally cannot return your shares during the term. Distributions may still be possible beforehand, for example if the fund sells a holding. Our article on the mechanics in detail shows evergreen funds.

Some funds combine several asset classes in one product, for example private equity and infrastructure. You can see which funds are available in the NAO app on our pages for Private Equity,Venture capital,private credit,infrastructureandmulti-asset funds. Fund documentation and the key information document for each fund are available directly in the app.

Opportunities and risks

Private markets can broaden your portfolio because they cover parts of the economy that are not represented on the stock exchange. Furthermore, managers actively work on their holdings.

This is offset by risks that are important to consider before any investment:

• Liquidity: Your capital is tied up for years. Depending on the fund, redemptions are only possible at specific times and to a limited extent; with closed-end funds, they are generally not possible at all during the term.
• Valuation: The NAV is derived from models and comparable transactions and follows market movements with a delay. Stable performance initially just means that valuations are carried out less frequently.
• Managers: A fund's performance depends heavily on its manager. In private equity especially, there is a vast difference between top-performing and underperforming funds.
• Costs: Selecting and managing unlisted assets is resource-intensive, which is reflected in the ongoing costs.
• Loss: Losses up to the total loss of the invested capital are possible.

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Our article explains why private markets nevertheless have a firm place in the portfolios of many large investors Why private markets can be important for your portfolio.

What to look out for when choosing a fund

With a private markets fund, a great deal depends on the manager's decisions. These questions will help you compare them:

• Track record: How long has the manager been active in this asset class, and how have they navigated difficult market phases?
• Stability: Has the team been working together for years, or have key figures changed recently?
• Costs: What ongoing costs and potential redemption fees are stated in the key information document?
• Transparency:Does the fund disclose which companies or projects it invests in?
• Equal treatment:Do small investors receive the same terms as large ones?

Our investment team uses these same criteria to vet every fund; we only select 1 in 8 funds.

What does this mean for your portfolio?

Private markets complement a portfolio of shares and ETFs, while the liquid portion remains available for money you need in the short term. Before you invest, you can clarify the following for yourself:

• What portion of your assets are you unlikely to need over the next few years?
• Which asset class suits your goal: regular income, as with private credit and infrastructure, or growth, as with private equity and venture capital?
• How are redemptions handled for the fund of your choice, and what costs are involved?

Do you have questions about how this works? Our customer service team is available to help you personally on weekdays. Feel free to get in touch.

FAQ

What are private markets?

Private markets is the umbrella term for investments that are not traded on a stock exchange. These primarily include private equity, venture capital, private credit, and infrastructure.

What is the difference between private markets and public markets?

Public markets are exchange-traded markets with daily prices, such as shares and ETFs. In private markets, prices are negotiated between buyer and seller, funds value their investments at fixed intervals, and redemptions may be restricted or, depending on the fund, not possible at all during the term.

Which asset classes belong to the private markets?

Private markets include private equity, venture capital, private credit, and infrastructure. Depending on the definition, real estate is also included.

Can private investors invest in private markets?

Yes, private investors primarily invest via funds, often within the legal framework of an ELTIF and sometimes with an evergreen structure. Since the ELTIF 2.0 reform in January 2024, the barriers to entry have been significantly reduced.

How long is my money tied up in private markets?

That depends on the fund; as a rule, it is several years. Some funds do not offer a regular right of redemption during the term. Whether you can redeem shares and under what conditions is set out in the fund documents and the key information document.

What are the risks of private markets?

The main risks are limited liquidity, delayed valuations, significant differences between managers, and higher ongoing costs compared to exchange-traded index funds. Losses up to and including a total loss of capital are possible.

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This article is for informational purposes only and does not constitute investment advice. Private markets funds are long-term investments: capital is tied up for the duration of the fund, redemptions are restricted, and there is a risk of loss, including the total loss of capital. The Key Information Document (KID) and fund documentation are the definitive sources of information. For funds available in the NAO app, you can find both documents directly within the app.

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