As private wealth investors deepen their exposure to private markets, knowing how to discern fact from fiction - or myth from reality - is paramount for ensuring safe portfolio construction. The potential pitfalls are many and varied.
In this article, we present three key myths and, with the help of Brendan McCurdy, Managing Director and Global Head of Investment Strategy, Ares Wealth Management Solutions, set the record straight on what private wealth investors need to know.
Myth #1: Private Markets Are Alternative and Hard to Use in Portfolios
Given the historical dominance of institutional capital allocating long-term capital, the perception has long been that private markets are too complex, opaque and illiquid for the individual investor. But the reality is they are increasingly used as core portfolio building blocks among a growing, meaningful cross section of the professional wealth management industry.
From his vantage point, McCurdy and his team are able to see deal flow and pricing across private equity, private credit, infrastructure and real estate. This helps to provide clarity for wealth investors on how best to incorporate these asset classes into their portfolios.
“I'd say the reality is that private markets are increasingly core portfolio building blocks. Equity is equity, and credit is credit. Some are publicly traded on exchanges and some are not, but at the end of the day they still represent the same sorts of risks and return drivers in the portfolio.
“Private equity should be viewed as part of the total equity portfolio and private credit as part of the total credit or fixed income portfolio. We view the distinction as being public versus private and not traditional versus alternative,” explains McCurdy.
It helps too that the industry has experienced significant fund structure innovation over the last decade. With the growing popularity of perpetual funds, accessing private markets has become significantly easier.
By investing fully on day one, these structures remove the complexity of capital draw downs, which come with a lot of upfront expenses and cash drag during the early years (the J-curve effect).
Improved reporting and more predictable cash flows - especially in secondaries - make private markets less formidable and an effective complement to public market portfolios.
Myth #2: Private Credit is Overcrowded – Too Much Capital Chasing Too Few Deals
Private credit has been the pre-eminent growth story in recent years, reaching $1.9 trillion in AUM, as of the end of 2024. The perception is that too much capital has flowed in chasing too few deals, meaning spreads will compress and returns will inevitably disappoint. The reality, however, is that this growth has been structural, not cyclical and a result of displacement as banks continue to retrench in response to regulations and balance sheet constraints. This has tipped the market scales in favour of private credit.
“The asset class has grown not because of excessive risk taking in the market, but because it offers an attractive value proposition to borrowers,” Brendan McCurdy.
Unlike broadly syndicated loans, direct lending loans are fully bespoke, bilateral financing structures. This creates strong alignment between the lender and the borrower over the full business cycle. Some of the loans Ares has underwritten to companies over the last two decades are in their 4th or 5th iteration, further underscoring the commitment to secure underwriting in the asset class.
“I would reject the notion that the expansion of private credit reflects any sort of deterioration in borrower quality. For a lot of the loans that have been made over the last few years, there's actually been a reduction in total leverage,” adds McCurdy.
With their ability to potentially generate durable return premiums of 150 to 300 basis points relative to liquid fixed income markets - thanks to structural seniority and active monitoring - these are investments that are designed to be held through cycles.
Far from being overcrowded, private credit remains compelling for those who have scale, a sophisticated origination network, and the underwriting discipline to stay selective in a competitive arena. Moreover, periods of volatility and dislocation tend to represent the best deployment opportunities.
“We’ve seen many institutional investors increasing, not reducing, their private credit exposure during this period of stress.” states McCurdy.
Myth #3: Private Equity Secondaries Are Just About Buying at a Discount
Private equity secondaries have matured significantly in recent years, with transaction volumes surpassing $200 billion in 2025. Yet there is still a perception that these are opportunistic trades that only work when assets are acquired at steep discounts.
In reality, private equity secondaries are less about discount and more about portfolio construction and risk management. Not only do they provide exposure to often high quality assets and greater visibility into performance, they also offer shorter duration, thereby generating earlier cash flows and reducing the level of blind pool risk associated with primary investments. By holding mature assets that are further along in their value creation journey, secondaries are an effective way to manage the J-curve effect.
Used together, primaries and secondaries can create a more resilient private equity allocation, combining long-term growth with improved cashflow dynamics and diversification across vintages and asset maturity.
PE secondaries have experienced significant evolution over the last decade.
Previously, the main function was providing liquidity to LPs who wished to exit private equity investments. Today, approximately 50% of transactions involve providing liquidity directly to GPs - referred to as GP-led deals - to allow them to hold high quality portfolio assets for longer, and avoid having to sell to another sponsor or go the IPO route; which remains subdued.
These structures, known as continuation vehicles, dispel the myth that secondaries are only the preserve of forced sellers and heavily discounted, legacy assets.
“We are positive on continuation vehicles, that’s where we see some of the best re-turn potential. If there is any kind of a market dislocation or you see discounts widening out, it's a great time to come back into the market and be a provider of liquidity to LPs, but right now it is these GP-led transactions that we like the most,” says McCurdy.
In summary, existing myths and perception often miss the bigger picture.
Private markets are no longer niche or opportunistic. They are becoming intentional (rather than tactical) tools for portfolio construction in private wealth.
Private markets offer ways to diversify risk, improve cash flows and cash flow visibility, manage volatility and shape outcomes more deliberately than by relying on public markets alone.
Sources:
In our conversation, Brendan referenced several datapoints from various sources. Here's a list of sources that were mentioned:
7m10s – “150-300 bps of extra return per year over the liquid fixed income markets” Cliffwater Direct Lending Index, S&P UBS Leveraged Loan Index, as of December 2024.
9m41s – “secondaries traditionally have given roughly the same return as private equity” Burgiss, as of March 2025
10m27s - “about 50% of the market are those traditional secondaries” and “now 50% of the market is actually providing liquidity to GP’s” Evercore Private Capital Advisory - 2025 Secondary Market Highlights, January 2026