What every HNI should know before investing in private market funds

Private market investments have become an increasingly popular asset class among high-net-worth individuals (HNIs), offering access to private equity, venture capital, private credit and infrastructure assets that are unavailable on public stock exchanges. However, unlike listed equities or mutual funds, private market investing requires a different mindset—one centred on patience, liquidity planning and long-term value creation. According to a Julius Baer report, investors should evaluate private market investments through three dimensions: risk, return and time.

Time is key

One of the biggest misconceptions is that illiquidity is purely a risk. The report argues that limited tradability is actually a defining feature of private markets because it gives fund managers the flexibility to improve businesses or assets before selling them when market conditions are favourable. This ability to create value over time is one of the reasons private market investments can generate attractive returns.

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Investment timeline

HNIs should be prepared for a longer investment horizon than they would typically expect in public markets. Due diligence itself can take six to nine months before an investment is completed, while executing value creation strategies generally takes three to five years. Investors should therefore avoid committing money they may need in the near future.

Fund Life vs Capital Lock-In

A common assumption is that money remains locked in for the full life of a private market fund, which is often around 10 years. The report notes that this is not usually the case. Capital is invested gradually and returned over time as underlying assets are sold, a pattern commonly known as the J-curve. As a result, investor capital is generally at work for a shorter period than the fund's legal duration.

Time to Liquidity

Rather than looking only at a fund's tenure, investors should understand its time to liquidity—the average period it takes for invested capital to be returned through distributions. Across most private market strategies, this ranges from three to five years, although it varies by asset class. The report notes that strategies with longer times to liquidity have historically generated higher returns, while the link between liquidity duration and risk is much weaker.

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Market conditions

Exit opportunities depend heavily on market conditions. During favourable periods, fund managers may sell or list investments sooner and at better valuations, resulting in faster distributions and stronger returns. Conversely, weak markets can delay exits and extend holding periods. Investors should therefore set realistic expectations about the timing of cash flows.

Diversification is essential

The report also highlights the importance of diversification. Liquidity outcomes can vary significantly across funds, managers and strategies. HNIs can reduce liquidity risk by spreading investments across multiple fund managers, investment strategies and vintage years, while also stress-testing their portfolios for delayed distributions.

For HNIs, private market investing is less about chasing quick returns and more about aligning investments with long-term financial goals. Understanding how capital is deployed, when it is likely to be returned and how market conditions influence exits can help investors build more resilient portfolios while setting realistic expectations on liquidity and performance.

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