Private Markets Explained: A Beginner’s Guide for UK Investors

Private markets are an increasingly talked-about area of investing, but for many people, they remain confusing, opaque, or even intimidating. This guide is designed for beginners and explains what private markets are, how they differ from traditional investments, and why they may (or may not) have a place in a long-term wealth strategy.

What Are Private Markets and Why UK Investors Are Talking About Them

In simple terms, private markets are investments that are not traded on public stock exchanges such as the London Stock Exchange or the New York Stock Exchange.

When investing in public markets, investors typically buy shares in listed companies, bonds issued by governments or corporations, or funds that trade daily. Prices are visible, transactions are frequent, and investments can usually be bought or sold quickly.

Private markets work differently. They involve investing directly, or via specialist funds, into assets such as private companies, property projects, infrastructure, or private lending. These investments are usually held for many years and are not easily bought or sold.

Private markets involve investing directly, or via specialist funds, into assets such as private companies, property projects, infrastructure, or private lending

What Are Private Markets? Private Equity, Private Credit and Alternatives Explained

• Private market investments typically include:
  Private companies rather than listed firms
• Private property developments
• Infrastructure assets such as roads, renewable energy projects or utilities
• Private lending, where investors lend directly to businesses

Because these assets are not publicly traded, they tend to be less transparent and more illiquid than public market investments.

The Main Types of Private Market Investments

Private Equity Explained

Private equity involves investing in companies that are not listed on a stock exchange. This may include growing businesses that need capital to expand, established firms undergoing restructuring, or management buyouts.

The goal is typically to improve the business over time and sell it at a higher value, often after five to ten years.

Venture Capital Explained

Venture capital is a subset of private equity focused on early-stage or start-up companies. These investments can offer high potential returns but also carry a higher risk of failure.

Private Credit Explained

Private credit, sometimes called private debt, involves lending money directly to businesses instead of buying publicly traded bonds. Investors receive interest payments and the return of capital over time.

This area has grown as banks have reduced lending to smaller and mid-sized companies.

Private Property and Real Assets

This category includes:

• Commercial property developments
• Social housing
• Infrastructure such as wind farms, solar projects or transport assets

Returns may come from rental income, usage fees, and long-term capital growth.

How Private Markets Differ from Public Markets

Liquidity Differences Between Private and Public Markets

Private market investments are illiquid. Investors usually cannot sell them quickly and must be comfortable committing capital for long periods.

Transparency and Valuation in Private Markets

Public markets publish prices daily. Private investments are valued less frequently and often based on estimates.

Access to Private Markets for UK Investors

Historically, private markets were only accessible to institutions and very wealthy individuals. Access has widened, but many opportunities remain restricted to certain investor types.

Risk and Return Profile of Private Market Investments

Private markets often aim to deliver higher long-term returns than public markets, partly to compensate for illiquidity and complexity. However, returns are not guaranteed and losses are possible.

Private markets often aim to deliver higher long-term returns than public markets, partly to compensate for illiquidity and complexity

Why Investors Use Private Markets in a Diversified Portfolio

Investors may consider private markets for several reasons:

Portfolio Diversification Benefits

Private markets behave differently from public equities and bonds, helping to spread risk.

Long-Term Growth Potential

Many successful businesses grow privately for years before listing, if they list at all. Private markets allow investors to participate earlier.

Income Opportunities from Private Markets

Private credit and some property investments can offer predictable income streams.

Volatility Characteristics of Private Assets

Private assets are not priced daily, which can reduce visible volatility, although this does not eliminate risk.

The Risks of Private Market Investments

Private markets are not suitable for everyone. Key risks include:

• Illiquidity, with capital tied up for many years
• Complexity in structures, fees and risk profiles
• Manager risk, as outcomes depend heavily on fund expertise
• Valuation risk, where asset values may change or be revised

For this reason, private markets are typically used as part of a broader portfolio rather than a standalone strategy.

Private markets are not suitable for everyone – they are typically used as part of a broader portfolio rather than a standalone strategy

How UK Investors Can Access Private Markets

Most individuals access private markets through:

• Specialist private market funds
• Feeder funds or fund-of-funds
• Solutions selected by wealth managers

Minimum investments may be higher than for public funds, and eligibility requirements often apply.

This is where professional advice is particularly valuable. A wealth manager can help determine whether private markets are appropriate and which types align with your goals and risk tolerance.

Are Private Markets Right for You as a UK Investor?

Private markets may be suitable if you:

• Have a long investment horizon
• Do not need short-term access to all your capital
• Understand and accept the additional risks
• Already hold a diversified portfolio

They may be unsuitable if you need liquidity, certainty or simplicity.

Final Thoughts: Getting Advice on Private Market Investing

Private markets can play a valuable role in a modern wealth strategy, but they are not a universal solution. Understanding how they work and where the risks lie is essential before investing.

For many people, the most sensible approach is to explore private markets with the guidance of a qualified wealth manager, ensuring they are used appropriately within a broader financial plan.

If you are considering private market investments, private equity or other alternative assets, speaking to a qualified adviser is essential. Find a Wealth Manager helps connect you with regulated UK wealth managers who can advise on diversification, long-term investing and whether private markets are suitable for your circumstances.