Public vs. Private Markets: What's the Real Difference

And Why It Matters for Nearly Any Portfolio

When it comes to investing, not all markets are created equal. You’re likely familiar with stocks, bonds, and cash, those are public markets, where price tags change by the second and headlines move the needle. But there’s another world behind the scenes: private markets, where many of the most compelling investment opportunities never see the light of a ticker symbol.

Let’s break it down.

Public Markets: Open for Business

Public markets include stocks, bonds, and cash equivalents, essentially anything traded on an exchange. These are broadly accessible, highly liquid, and transparent. You can buy Apple or a T-Bill before breakfast and sell it by lunch. Exposure can come directly or via pooled vehicles like mutual funds and ETFs. For the more daring, there's a world of synthetics offering leveraged or inverse exposure across asset classes and strategies.

In short, the public markets are vast and deep, offering opportunities for nearly any portfolio, in any environment.

But there are trade-offs:

• Market noise and short-term volatility can wreak havoc on even the most disciplined investor.

• Correlation risk between traditional assets is increasing. According to J.P. Morgan Asset Management, from 1963 to 1999, the average correlation between the S&P 500 and the 10-Year Treasury was 0.28. From 2000 to 2020, it flipped to -0.32, ideal for diversification. Yet since inflation’s resurgence, that correlation has jumped to 0.49.

  
  

Case in point: in 2022, the S&P 500 dropped -26.3%, while 10+ year Treasuries fell even more, down -29.8%.

Bottom line: investors need more tools in their toolbox. That’s where private markets come in.

Private Markets: Access Granted

Private investments aren’t traded on public exchanges, no stock tickers, no CNBC coverage, no minute-by-minute volatility. They typically require longer holding periods, but in return, offer exposure to return streams not available in public markets. Crucially, they provide true diversification away from traditional public assets with superior risk-return characteristics.

While the private markets are a broad landscape, they generally fall into four core categories:

• Private Equity – Ownership in private companies, including leveraged buyouts, growth capital, and venture capital.

• Private Credit – Lending to private firms (direct lending, distressed debt, mezzanine financing), often with high yields and favorable terms.

• Private Real Estate – Investment in income-producing commercial or residential properties not traded on public REIT markets.

• Private Infrastructure – Long-term assets like toll roads, airports, energy infrastructure, and data centers.

  
  

Highlights:

• Private equity provides access to a vastly larger opportunity set. In the U.S., 86% of businesses with over $250 million in revenue are private—only 14% are publicly traded.

• According to Blackstone, from 2007 through Q3 2024, private equity returned 12% annualized, compared to just 7% for public equity. Since 1986, in drawdown periods when the S&P 500 dropped 10% or more (average decline: -16%), private equity declined just -5%.

  
  

  

  
  

• Many private credit funds (e.g., Blackstone, Apollo, Blue Owl, Carlyle) are yielding 9–11%, supported by floating-rate, senior secured loans, offering lower credit and inflation risk. For comparison, the Bloomberg Aggregate Bond Index yields just 4.4%.

• In 2022, when publicly traded REITs dropped roughly -24%, private real estate funds rose by approximately 7.5%.

• Traditional private infrastructure is often composed of regulated, monopoly-like assets, think utilities, LNG terminals, and digital infrastructure. These investments are typically “boring,” cash-rich, and enjoy inflation-linked pricing power.

Why It Matters for Your Portfolio

Public markets provide liquidity and price transparency, but are subject to sentiment, media noise, and short-termism. Private markets offer the potential for higher returns and lower reported volatility (thanks to less frequent pricing), especially in areas where public capital doesn’t reach.

That said, private markets aren’t for every portfolio. They demand:

• A longer time horizon

• Comfort with illiquidity, especially during periods of market stress

• Patience with capital calls and distributions

• A tolerance for complexity

  
  

For qualified investors, private markets can enhance portfolio diversification, reduce reliance on stock/bond correlation, provide higher cash flows (yields), and offer access to institutional-quality strategies.

Final Thought

If public markets are the foundation of a portfolio, private markets are the bricks that quietly build long-term wealth. At Consilium, we help clients access both public markets for liquidity and transparency, and private markets for growth and income.