Morningstar Investment Conference: Don’t Think of Private Markets as Special

Investors tend to put private equity and private credit in different buckets than stocks and bonds and evaluate them on metrics particular to those markets. But at the 2026 Morningstar Investment Conference, one theme was that investors shouldn’t think of private markets as different.

“Don’t think of private markets as special; it’s just a different access point to an asset,” said Ankul Daga, head of private markets portfolio research at Vanguard.

Speaking at the panel “Private Markets, Public Scrutiny,” panelists said investors would be best served by deciding on allocations to private equity and private credit investments as part of overall equity or fixed-income portfolios, including assessing the relative value of private investments against public options. Importantly, that includes a focus on returns after fees, given the very high costs of most private markets, as well as assessing manager skill. Putting money to work in private credit funds requires more transparency and an understanding of the investment process behind the strategy. That’s a critical difference from a starting point of assigning a percentage of a portfolio that should be held in private markets, according to panelists.

Risk Tolerance

One different consideration for private investments is limits on investors’ ability to withdraw money. But the panelists said that beyond the time horizon around liquidity, the basics of evaluating equity or fixed-income investments aren’t that different between public and private markets.

When matching an investor’s risk tolerance with private equity, the metrics are similar to those of publicly traded stocks, Vanguard’s Daga said. “We go back to the basics and think about the economic factors the private assets give the end investor exposure to,” he said. “In that regard, private equity or a buyout is not very different from public equity. You’re still sensitive to interest rate risk, inflation risk, and the earnings growth of these companies. And on top of that, because they’re illiquid, you get some premium for it.”

Nick Nefouse, global head of retirement solutions at BlackRock and head of the firm’s LifePath target date offerings, took a similar view in response to a question about the risks of private investments and sizing a private-market allocation in a portfolio. “We don’t look at these as a different asset class,” he said. “Think of it as traded vs. non-traded equity, or traded vs. non-traded credit. They still have the same underlying factors.”

Nefouse continued: “The worst idea would be to take a liquid or tradable portfolio and just bolt on a private portfolio. Those are not separate things. Maybe I do want some private credit; that should be funded by public credit, because it has roughly the same characteristics.”

The Importance of Benchmarking

To that end, panelists said the evaluation process should also include measuring private investment performance after fees, just as with public investments. “We can only add private markets to a portfolio if it improves outcomes, net of fees,” Nefouse said. “This isn’t some sort of mythical asset class that we can put in that doesn’t have fees. So we have to establish a benchmark, then put private markets in only if they’re going to beat that, net of all fees.”

Benchmarking is a critical part of the process, according to the panelists. “Let’s say I start with a 60/40 portfolio and I measure its risk in volatility terms or drawdown terms, if that is what their risk budget was, by using these additional assets, did I improve the outcome for them?” explained Vanguard’s Daga. “What it’s replacing in the portfolio is the north star.”

BlackRock’s Nefouse said his rule of thumb is to see where a portfolio’s private markets can beat the LifePath Index, which comprises public markets. “If we add private markets, whether we like it or not, LifePath Index will be the benchmark, because it is widely available and investable,” he said. “If this product can beat Life Path Index, we know we’re successful.”