255. The Rise of Private Markets: Access, Liquidity, and Portfolio Diversification
Web Title: The Rise of Private Markets
Episode Description full (Apple Podcasts, Spotify):
Private markets are moving from the sidelines of institutional portfolios into the mainstream of wealth management. As companies stay private longer and financing increasingly happens outside public exchanges, investors are beginning to rethink how broad the traditional investment universe really is. The shift is raising a new question for portfolios: should investors be looking beyond public markets to access the full range of opportunities across capital markets?
In this episode of The Bid, host Oscar Pulido speaks with Jon Diorio, Head of Product and Alternatives for BlackRock’s U.S. Wealth Business, live from the Future Proof Citywide conference in Miami. Together they explore why interest in private markets has accelerated in recent years, how access for individual investors has expanded, and what’s driving greater adoption among financial advisors.
They also discuss how private markets differ from public markets — including liquidity considerations, longer investment horizons, and the potential role of what’s often called an illiquidity premium. The conversation explores how private equity, private credit, infrastructure, and real estate investments may fit within diversified portfolios, why education and due diligence remain essential, and how the industry is evolving to integrate private assets more seamlessly into modern portfolio construction.
Key insights from this episode:
Introduction
What are private markets and alternatives?
Why companies are staying private longer
How access to private markets has expanded
Liquidity, time horizons, and the illiquidity premium
Private markets vs public markets investing
How advisors integrate private markets into portfolios
Challenges and due diligence in private markets
The future of private markets investing
Keywords: private markets investing, private equity, private credit, alternatives investing, portfolio diversification, capital markets, wealth management, investment strategies
Sources: Bloomberg as at 12/31/2025, BlackRock US Wealth Survey Internal
Written Disclosures In Episode Description:
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to any company or investment strategy mentioned is for illustrative purposes only and not investment advice. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures.
<<TRANSCRIPT>>
Oscar Pulido: Once the domain of large, sophisticated, and primarily institutional investors. Private markets are now making their way into individual investor portfolios in a much bigger way. As companies stay private longer and seek new ways to diversify their borrowing needs, investors are asking a big question. Is it time to expand the investment universe to include both public and private markets?
Welcome to The Bid where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm Oscar Pulido.
We're coming to you live from the Future Proof Citywide Conference in Miami, where investors, advisors, and asset managers are gathering to talk about what's next and one topic that keeps coming up private markets.
I'm joined by Jon Diorio, head of Product and alternatives for BlackRock's US Wealth Business. We'll discuss how access to private markets has expanded dramatically over the last decade, and what new considerations come with that access from liquidity and time horizon to complexity and risk.
Jon, thank you so much for joining us on The Bid.
Jon Diorio: Great to be here, Oscar. Thanks for having me.
Oscar Pulido: And Jon, we are at the Future Proof Citywide Conference in Miami. this is an event that brings together, investment professionals from the asset management industry as well as the wealth management industry. And the conference is really here to talk about trends over the next year. One of those trends that is being talked about here at the conference, and that has actually been in the headlines over the last few years. Our alternatives and private markets. This is a space that you know well. And these are categories that investors are increasingly more interested in.
So maybe talk a little bit about alternatives and private markets. Are these the same things and why are people interested in investing in these now?
Jon Diorio: Yeah, great. And it's great to be here in Miami, for those of you that can't see, we're actually, out on the beach here. It's a very interesting conference, very dynamic. And so we're getting some great engagement, Oscar especially to, what you're talking about around, alternatives in private markets. And I think the first thing that we hear a lot for clients is how do I start to think about alternatives? 'Cause a lot of them haven't used them. And I think there's a reason for that. if you think about the traditional 60 40 portfolio, we're recording this in March, the traditional 60 40 portfolio as a February 28th, it's up over 14% over the last three years. Right, and so, I think there's two dynamics there.
One, which is maybe clients feel like they haven't needed, other forms of diversification. But I think what's happening now is volatility is picking up, you're moving into another year of what has been an equity bull market, people may be a little bit more concerned around the role that fixed income can play in the portfolio as ballast. One of the things that we've been talking about is you need to have more durable portfolios. you need diversification in there. I think that is really where alternatives in private markets can take advantage of that dispersion, it can give clients a smoother ride so they can stay invested. I think that's the number one reason that we see clients using alternatives. As I pivot a little bit to private markets specifically as a subset of alternatives. The markets have just evolved so much. The example I like to use goes back over 50 years. And 50 years ago, the Wilshire 5,000 Index came out in 1974, and as you could imagine, when it came out, it had 5,000 stocks. That index got up all the way up to over 7,500 stocks right before kind of the tech bubble and the late nineties. Today it's sitting at around 3,400 stocks. So, the number of publicly traded companies since the late nineties has cut in half. I think the other thing that we're seeing is if you want to have access to that entire opportunity set, you really need to think about private markets, whether it's on the equity side. A lot of financing is now done in the private credit markets, real estate, a lot of transactions are not done publicly, so private, real estate. and certainly we see a generational opportunity in infrastructure, much of that is also done in the private markets. So there's some really big asset classes out there that if you want to get access to them, you really need to be in the private markets to get them.
Oscar Pulido: You mentioned a couple things, you talked about the 60:40 portfolio, which has done well over the last couple of years, but recent market volatility is a reminder that it's always good to think about other diversifiers and the BlackRock Investment Institute in their 2026 outlook talked about this diversification mirage that sometimes it's hard to find diversification, therefore you have to look broader and maybe alternatives in private markets are part of the way to do that.
You also talked about access, and private markets, I think, historically are a playground for more sophisticated or maybe more institutional investors. For the individual investor, it's been hard to access, but that's changed a lot over the last 10 years. So, what's been the impetus for that change?
Jon Diorio: Let's start off by why you'd want access, right? so I'll use that example of companies staying private longer. Let's use a company like Amazon that everybody knows. Amazon actually went public in 1997, their market cap when they went public was about $400 million. Their market cap today is around $2.4 trillion. So all of that wealth creation and growth, that actually happened in the public markets. Now, what you're seeing is companies are staying private longer, clients want access to that. There's a lot of really interesting companies, most of the economy, actually, the private markets are bigger than the public markets. So, if you want access to higher yielding income or some of these interesting growth companies, you need to get access through the private markets. And that's why we've seen institutions really investing in private markets for quite some time. I think the issue for wealth and the typical individual client was they couldn't access that. And I think two things have really changed. One is structure, the other one is technology. And structure, there's been a lot of different interesting products that have come out that have not given the wealth community access to these investments.
And then the second thing is technology. It used to be pretty hard to get invested. You used to have what's called QP qualifications, so that's higher suitability used to get K-1s, which makes your tax documents a little bit harder. And so, there's been a lot of technology and sort of legal interventions that have made it easier for clients to go ahead and invest. And I think that's been really important to give clients access as well.
Oscar Pulido: So, you touched on the Wilshire 5,000. And how there's still a lot of investment opportunity in public markets, but maybe not as much as was the case over the last few decades. And so therefore there's an investment opportunity in private markets that investors are interested in but the access has gotten easier, it's become more convenient, the vehicles exist to make the access to those opportunities easier.
So does that mean that private markets, Jon, are for everyone, or are there certain characteristics. That people need to keep in mind that therefore it's more selective who should invest in this?
Jon Diorio: I think the answer is private markets are not for everyone. a financial advisor needs to sit down with the client and understand their long-term plan. but what we see is alternatives in general in private markets can play different roles.
There's some alternative strategies that can provide you a hedge. Think about something like commodities which you can get in the public markets, but some of them are more private in nature. We talked about those diversification benefits. Some clients might want to amplify their returns too, and as you go into the private markets, you can get amplification of return by being into private equity where you can get higher yields or higher returns than you might be able to get in the public markets.
The answer first is, what is the role that you want alternatives or private markets to play in your portfolio? I think that needs to be very intentional and you need to understand what that's doing for your portfolio. The second thing is what is your time horizon and where are you putting these things? This is one of the reasons that I think private markets and retirement accounts has been a big topic. For example, that tends to be an interesting area even though a lot of people aren't doing it, but those are typically longer durated assets, right? Where people have long-term time horizons, they're going to be very strategic in nature. You're saving for something that's maybe 10, 20, 30 years away. Something like that is very interesting for private markets because there's no liquidity mismatch.
We would say for somebody that's just looking to become tactical, you need to have a longer-term time horizon. These products were not created to be tactical products. They were really created for strategic allocations and going back to our original point, which was to provide access but making sure they know what they're buying,
Oscar Pulido: And let's maybe talk a little bit more about that. You mentioned that one of the ideal places in a portfolio for private markets might be a retirement account where you have a long-term time horizon and where presumably you're not touching that money that often, right? It's really meant to be there 20, 30 years and beyond for when you retire.
So, liquidity is very different in the private markets versus the public markets where you can transact every day. You have to be willing to sacrifice some liquidity when you invest in private markets. But talk a little bit more about how investors should think about that and think about the time horizon they have to see when they put money to work there.
Jon Diorio: So first I'll tell you how we think about it and then I'll tell you how investors think about it. Private markets can sometimes be this ubiquitous, broad category. But there's, as we said, there's different segments to it. So, for example, if you think about something like infrastructure, these tend to be longer derated assets. they don't really fit that great right now into these evergreen type vehicles because you have to buy large assets, you have to improve those assets typically, and they tend to be longer durated lives.
If I think something like a private credit or something like that, these are shorter duration assets, right? That are turning over more, you have more visibility into those cash flows that are coming, and so it, it allows us to more easily manage that. Now that said, because it is private and to your point, there's a complexity premium and a liquidity premium. Most of these products state up front that, you know you're only going to have typically about 5% quarterly liquidity. And so I think it's really important that investors know that's a feature, right? Some people think about it sometimes as I can't get my money out or it's a bug. But it's really a feature because that allows the portfolio management team to go ahead and harvest that complexity, premium harvest that illiquidity premium. And the most important thing I think, around private markets is that sourcing, right? You have to go out and find those opportunities.
So, I think a lot of times people compare private markets to public markets. They're vastly different. It's not like you can go out and buy something on exchange or that's publicly traded, you actually have to go and source those assets. And so, there's just a different time horizon associated with that.
Oscar Pulido: And just when you say illiquidity premium, I think people understand the term illiquidity, meaning I can't get access to my money as quickly, but the premium means that historically private markets offer a premium return relative to public markets. So you are being compensated-
Jon Diorio: Correct, you're being compensated for that. So, when we go in, a company might not want to go to the public markets for various reasons. Sometimes some of those can go to the public markets. They choose to go to the private markets for regulatory purposes or speed, or they have comfort, in that market. but with that, typically, so if you were taking the private accredit example, typically over time you get about a 200-basis point premium over what you would get in those public markets. 200 basis points in yield, that can add up. So, there's certainly a strategic reason to do it, but you have to understand that you are getting that illiquidity premium. And that comes, with the liquidity constraints that private markets have.
Oscar Pulido: Let's go back to the topic of access to private markets. If somebody's approaching this for the first time, maybe you can help define those topics again, or let's go into a little bit more detail on what that means.
Jon Diorio: Yeah, and so the, one of the questions I always get asked is, a lot of people in the beginning of the conversation nod their heads Yes. That, that, all, that all makes sense. the opportunity set in private markets are there. The performance has been there. I want to add to the portfolio, and the question I always get asked, Oscar is, so in, in wealth, the allocation to alternatives in private markets still remains much lower than what we see in typical institutional clients.
Actually, we just did a really interesting survey at BlackRock where we surveyed over a thousand advisors and what we saw actually now is actually for the first time, over half of them are using private markets with individual investors and clients.
But the allocation still remains low, it's actually about 7%. So, it's moving up, but that's still below where we see a typical institutional client. So, the question becomes why is that? And, I think the biggest issue is there's a lot going on. So, doing the due diligence on this, understanding how to manage all of these can be quite difficult. and so, I think that's where there's really an opportunity for the industry, which is right now, many of these private markets are being bought on the side of a portfolio, and they might not fit in holistically to your plan. People are buying them because they think they're exciting or they buy into the thematic narrative that the product is talking about. but they're not fitting into that kind of portfolio construction. And you started off the conversation saying you need to look at things like correlations and how does this fit into the portfolio? And so, we think one of the really interesting things is starting to think about how to get these into model portfolios and start managing these more professionally, that way private credit can be an allocation that's part of your fixed income sleeve. Private equity can be an allocation that's part of your equity sleeve, doesn't need to fit in a separate alts bucket. It can be integrated into the portfolio, and then you understand exactly what role it's playing. And so, I think there's still a lot of confusion and diligence that needs to be done in the space.
Oscar Pulido: Right? I think what you're saying is that the industry, uh, has sort of two, uh, responsibilities. Maybe part of it is educating investors. What are private markets? What are we talking about when we use that term? But also how do you use them? How do you allocate them? What, should you be replacing in your portfolio when you're, when you're allocating to the space-
Jon Diorio: Yeah, the ‘fit and function’ we call it of where does it fall into a model portfolio, I think is critically important.
Oscar Pulido: Let's talk about some of the challenges. Presumably, there are some things that, that we have to consider. As challenges when allocating to private market. I think a lot of the picture that you've painted is, it's a great opportunity. More investors should be allocated here. But what's the other, the flip side to that coin that you see from the conversations that you have?
Jon Diorio: I think the first challenge is what we touched on, which is there's a diligence challenge on this, which is private markets are inherently less transparent now. I think the industry, through education around trying to provide data, so I think the industry is trying to make the private markets more transparent so you can understand the risks that are inherent in the portfolio a little bit better, but they're inherently less transparent than public markets.
And so therefore, challenge number one is understanding that can be difficult. Number two is if the advisor decides that they do want to change, their allocation, it is easier to do in the public markets, right? Because public markets are daily liquid. And so, the first challenge is you might be a little bit unsure around how this fits into the portfolio, you need some help. Number two might be you're worried about making a mistake, right? and so when you're worried about making a mistake and you don't have confidence, that is always a challenge. Third, you hit it right on the head, which is just education, which is clients really need to be educated on what role these play in the portfolio and how, again, they strategically be fitting into the portfolio. And so that time horizon conversation that, that portfolio conversation is really important
Oscar Pulido: And so, Jon, given everything we've talked about, I think you've done a great job of helping us understand what are private markets, how has the space evolved, how has the access improved, and what are some of the challenges? So, for somebody who's listening to this, what's that next step to think about starting to build that allocation to private markets in their portfolio?
Jon Diorio: I think the next step is twofold. The first example I like to give is on that complexity side of it. The example I've given is it reminds me of the early days of getting around. When I was a kid, my dad had to pull out the map and going to a basketball tournament was difficult because you didn't know exactly how to get there, and you were checking, and then all of a sudden MapQuest came along and you could actually print out the instructions.
And then you had the GPS device that went on, but it didn't quite work if you were in the Miami heat because it overheated. But now that's all integrated in, and it's seamless technology. I think that is where we are ultimately going with private markets, which is the industry is really looking to integrate this in and So I think number one is convenience around trying to really fit this in. I think the second is just providing asset allocation IP, and guidance as to where it fits, that's where the industry is going.
Oscar Pulido: I do remember printing out MapQuest directions back in the day. I remember having them in the passenger seat on my way somewhere. But you're right, it has gotten a lot easier to navigate and hopefully it'll get a lot easier to think about how to allocate, to private markets going forward.
Jonn, you touched on the fact that we're in Miami. We are looking at the beach. We've been holed up in the northeast, you and I, for the last couple of months. So, making it down to hot weather is a bit of a shock. So, let's make sure we have our suntan lotion on today and not burn ourselves. Thank you for sharing all this insight on private markets and thanks for doing it on The Bid.
Jon Diorio: Thanks for having me, Oscar. It's been great.
Oscar Pulido: Thanks for listening to this episode of The Bid. If you've enjoyed this conversation, check out our episode on alternative investments, where we take a look at the asset classes that are increasingly becoming a focus for investors looking to diversify. Subscribe to The Bid wherever you get your podcasts.
<<SPOKEN DISCLOSURES>>
This content is for informational purposes only and is not an offer or a solicitation. Reliance upon information in this material is at the sole discretion of the listener. Reference to the names of each company mentioned is merely for explaining the investment strategy and should not be construed as investment advice or recommendation. For full disclosures, visit blackrock.com/corporate/compliance/bid-disclosures
MKTG0326-5310084-EXP0327
