Financial professionals are increasingly embracing private markets for good reason: they expand the investable universe, offer the potential for enhanced returns, and provide meaningful opportunities for differentiation in a competitive market. Building a sustainable private markets business, however, requires far more than product access. A disciplined business encompasses four additional enablement pillars: education, research, portfolio construction, and compliance.
Financial professionals need both foundational and fund-level understanding of the investments they recommend, along with the ability to educate clients about how they function, applicable risks and liquidity constraints, and the intended portfolio impact. They also need a research process that supports meaningful fund comparison across structure, strategy, exposures, fees, and performance in a market where information is often fragmented. From there, private funds must be incorporated thoughtfully into the broader portfolio, with attention to sizing, diversification, and expected outcome in relation to the client’s overall public equity and fixed income allocation. And because private market funds are complex products, the process must be supported by thorough diligence, evaluation of reasonable alternatives, ongoing monitoring, suitability and concentration considerations, and appropriate documentation.
Although this may seem cumbersome, solutions exist to support an efficient approach.
Education
The organizing principle of a disciplined private markets practice is education. A foundational understanding of private markets at the structure or strategy level is a great place to start but is insufficient to make a reasonable recommendation. Financial professionals need to thoroughly understand, and be able to explain, the specific products and strategies they are considering for clients. Strong product-level understanding can transform private market opportunities from an abstract concept into solid diligence and specific recommendations that can be made responsibly, resulting in more favorable client outcomes.
Equally important is client education. When financial professionals truly understand the nuances of products they recommend and foster meaningful client education, inevitable bouts of broad market volatility and near-term uncertainty become much easier to navigate. During periods of stress, the financial professional should be confident in reminding clients of the basis for the recommendation. Much like a physician who must understand a treatment well enough to explain it with confidence, a financial professional needs conviction in the recommendation to educate the client adequately, answer questions clearly, and set realistic expectations initially and throughout the life of the investment.
In evergreen funds, for example, periodic liquidity can be a useful feature but it does not make the investment liquid. When markets are under stress and many investors seek liquidity at once, redemptions can, and likely will, become limited. Setting expectations early helps clients remain disciplined, stay invested, and focus on the long term when emotion and short-term pressure are highest.
Research
To make informed recommendations, a disciplined private markets business heavily depends on reliable, credible research.
In a market where the number of available products continues to grow, home office personnel often play an important role in curating a thoughtful product menu from a rapidly expanding universe. This menu only creates a starting point, however. Financial professionals still need a research-backed process for selecting among the approved options. In private markets, comparing funds across key attributes is often far more challenging than in public markets, as private fund information lacks standardization and can be difficult to source. Further, products that appear similar at a high level can have meaningfully different exposures, economics, and risk profiles.
Effective decision‑making in private markets requires consistent comparison across the attributes that shape investor outcomes. That includes understanding basics like investment strategy, sector, and portfolio company exposure across funds. For example, within private equity, distinguishing between buyout, growth, venture, and secondaries exposures, as well as differences in sector focus, company size, geography, and concentration, are important. As is comparing fees and expenses relative to performance across the full life of the investment, from the offering phase through capital deployment and, where relevant, the disposition and wind-down phase.
As evergreen funds grow in popularity, and considering their perpetual nature, it is imperative to monitor fund performance and activity on an ongoing basis as they inevitably shift to manage across various market cycles. More broadly, access to aggregated industry-level trend information across asset classes is ideal to place individual fund decisions in a wider market context. A research foundation gives financial professionals a stronger quantifiable basis for making recommendations.
Portfolio Construction
Private investments should be evaluated in the context of the client’s full portfolio—across equities and fixed income—not added as a separate layer on top of a traditional stock‑and‑bond allocation. Key considerations include where the private allocation should be sourced from and the appropriate size to provide the most effective path to a desired outcome. Depending on the client’s profile, goals, and existing holdings, the same private markets allocation may be a strong fit in one portfolio and unsuitable in another. Whether a financial professional is building a portfolio of individual funds, or leveraging a private asset model portfolio, they need a thoughtful framework for sizing exposure and diversifying across managers and strategies.
Allocation discipline is also important. For example, private markets should be layered into the portfolio over time, rather than transitioning from a 0% to 20%-plus allocation immediately. Rebalancing and effective management of committed but uncalled capital, where applicable, are also considerations from an overall allocation perspective. Until recently, portfolio construction tools did not effectively allow the evaluation of portfolios holistically, but today, financial professionals are able to access tools that enable the modeling of private assets alongside public allocations. This helps make both recommendations and client conversations more efficient and productive.
Compliance
Similar to public market investments, compliance is not a single point‑in‑time requirement, but an ongoing process that starts before a recommendation is made and continues throughout the investment lifecycle. Financial professionals require a thorough understanding of the product’s structure, strategy, liquidity profile, risks, objectives, performance net of fees, and expected outcomes in varying economic environments. It is imperative to thoroughly evaluate an investment in relation to reasonable alternatives, and to have a clear basis for why a particular structure, manager, and position size fit the client’s objectives and financial circumstances. The obligation to monitor continues throughout the life of the investment, including the basis for a hold, add, or redeem recommendation regardless of any available liquidity features. A disciplined and compliant process necessitates thorough documentation of the training completed, the alternatives considered, the initial and ongoing diligence performed, the client profile information relied upon, and the reasons for the recommendation. Depending on the structure and jurisdictional requirements, the process may also require investor eligibility considerations and concentration limitations.
An associated wealth management firm typically conducts extensive initial and ongoing asset manager and fund-level diligence to fulfill its own obligations, while also imposing proprietary policies, procedures, and supervisory guardrails. Although the firm’s diligence may assist a financial professional, it cannot be relied upon to fulfill the individual’s entire obligation.
Takeaways
The good news is that financial professionals do not have to do this alone. We are in a new era in which tools and service providers can support the work across education, research, portfolio construction, and compliance. Those capabilities do not replace the financial professional’s judgment, nor do they remove the obligation to understand both the product and the client, but they can make it far more practical to build a private markets business on a strong foundation.
IMPORTANT INFORMATION
The material herein has been provided to you for informational purposes only by Institutional Capital Network, Inc. ("iCapital Network") or one of its affiliates (iCapital Network together with its affiliates, "iCapital"). This material is the property of iCapital and may not be shared without the written permission of iCapital. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of iCapital.
This material is provided for informational purposes only and is not intended as, and may not be relied on in any manner as, legal, tax or investment advice, a recommendation, or as an offer or solicitation to buy or sell any security, financial product or instrument, or otherwise to participate in any particular trading strategy. This material does not intend to address the financial objectives, situation, or specific needs of any individual investor. You should consult your personal accounting, tax and legal advisors to understand the implications of any investment specific to your personal financial situation.
ALTERNATIVE INVESTMENTS ARE CONSIDERED COMPLEX PRODUCTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. Prospective investors should be aware that an investment in an alternative investment is speculative and involves a high degree of risk. Alternative Investments often engage in leveraging and other speculative investment practices that may increase the risk of investment loss; can be highly illiquid; may not be required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as mutual funds; and often charge high fees. There is no guarantee that an alternative investment will implement its investment strategy and/or achieve its objectives, generate profits, or avoid loss. An investment should only be considered by sophisticated investors who can afford to lose all or a substantial amount of their investment
STRUCTURED INVESTMENTS ARE CONSIDERED COMPLEX PRODUCTS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. Please note that there is no public secondary market for structured investments. Although the issuer may from time to time make a market in certain structured investments, the issuer does not have any obligation to do so and market making may be discontinued at any time. Accordingly, an investor must be prepared to hold such investments until maturity. Any or all payments are subject to the creditworthiness of the issuer. Before investing in any product, an investor should review the prospectus or other offering documents, which contain important information, including the product's investment objectives or goals, its strategies for achieving those goals, the principal risks of investing in the product, the product's fees and expenses, and its past performance.
iCapital Markets LLC operates a platform that makes available financial products to financial professionals. In operating this platform, iCapital Markets LLC generally earns revenue based on the volume of transactions that take place in these products and would benefit by an increase in sales for these products.
The information contained herein is an opinion only, as of the date indicated, and should not be relied upon as the only important information available. Any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets is not necessarily indicative of the future or likely performance. The information contained herein is subject to change, incomplete, and may include information and/or data obtained from third party sources that iCapital believes, but does not guarantee, to be accurate. iCapital considers this third-party data reliable, but does not represent that it is accurate, complete and/or up to date. iCapital makes no representation as to the accuracy or completeness of this material and accepts no liability for losses arising from the use of the material presented. No representation or warranty is made by iCapital as to the reasonableness or completeness of such forward-looking statements or to any other financial information contained herein.
Securities products and services are offered by iCapital Markets LLC, an SEC-registered broker-dealer, member FINRA and SIPC, and an affiliate of iCapital, Inc. and Institutional Capital Network, Inc. These registrations and memberships in no way imply that the SEC, FINRA, or SIPC have endorsed any of the entities, products, or services discussed herein. Annuities and insurance services are provided by iCapital Annuities and Insurance Services LLC, an affiliate of iCapital, Inc. "iCapital" and "iCapital Network" are registered trademarks of Institutional Capital Network, Inc. Additional information is available upon request.
© [2026] Institutional Capital Network, Inc. All Rights Reserved.
