How to future proof your private markets exposure
December 08, 2025
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8 min
Private markets are growing, turning private assets into a strategic part of investors’ allocation. But this move also brings complexity. In this rapidly changing environment, building your private assets exposure, or “investment programme”, requires new and specialist skills. Philippe Faget, Head of Private Assets at VEGA Investment Solutions, an affiliate of Natixis Investment Managers, explains why he considers diversification, controlled liquidity and manager selection to be key elements in creating value.
The growing importance of private markets in the global investment landscape requires portfolio managers and advisors to structurally rethink how to build resilient, diversified and value creating portfolios throughout economic cycles.
According to Preqin data, global assets in private markets have gone from about 4,000 billion US dollars in 2014 to almost 12,000 billion today, with projections indicating that these AUMs could reach 30,000 billion by 2030. This growth reflects both the expansion of traditional strategies - private equity, private debt, infrastructure, real estate - and the expansion of the investor base due to the democratisation of this type of investment via the new structures to access them, led by the European regulatory framework ELTIF 2.0 (European Long Term Investment Fund).
While the global growth story is clear, the gap between European and US retail investors being invested in private assets is still wide: in Europe, the retail share allocated to private markets is often less than 1%, compared to even double digits in the United States. An imbalance that suggests significant room for expansion.
Against this backdrop, the central question for asset managers and investors alike, is the following: how to build a private assets exposure fit for the future? The answer does not only concern the selection of asset classes and the choice of managers, but has many other implications such as the analysis of the economic cycle, the governance of evergreen solutions, the management of cash flows, the analysis of correlations and the ability to preserve liquidity without sacrificing expected returns.
The scope of private markets and their role in an investor’s portfolio
Private assets include unlisted investments ranging from private equity to private debt, to infrastructure and real estate. They offer investors a number of potential advantages: diversification, decorrelation from traditional asset classes, potential inflation protection, and the ability to generate potential superior returns by generating an illiquidity premium.
The correlation between private and public markets is indeed historically lower than that between listed asset classes. Studies performed by VEGA IS, based on compiled data from Cambridge Associates and Bloomberg suggest that the inclusion of private equity or private debt in a traditional portfolio can help both reduce its overall volatility and improve its returns over the long term. According to VEGA IS’ simulation, replacing between 15% and 30% of the traditional bond allocation with a multi private asset strategy can potentially increase annualised returns between 70 and 170 basis points while reducing risk by 130-230 basis points. This combination of factors - illiquidity premium, decorrelation, internal diversification - makes private markets an increasingly strategic component of advanced multi asset portfolios. It is therefore not surprising that, as Faget recalls, ‘private asset markets have experienced a massive growth in the last 20 years,’ driven not only by institutional investors but also by the growing demand for accessible solutions for private wealth and retail.
The key is diversification
The construction of a private assets investment programme requires a much more granular logic than for listed assets. Faget insists on one differentiating point: ‘The key word is diversification: for GPs, asset classes, strategies (primary, secondary, co investments), sectors, vintages and geographies.’ In private markets, diversification by year is particularly important because entry takes place through multi year commitments and because the distribution of returns tends to be sensitive to the phase of the market cycle in which the vehicle is subscribed. Avoiding investing ‘before crises,’ selecting what the teams sees as ‘the best vintages’ and focusing on first quartile managers are considered essential elements to achieve attractive Internal Rate of Returns (IRR), according to Faget.
Moreover, the dispersion of performance between top and bottom quartiles in private markets is significantly wider than in listed markets. For this reason, the selection of managers is another critical point.
But diversification does not only concern managers: the distribution of cash flows is also crucial. Faget emphasises that the different private segments have different liquidity and cyclicality profiles, and that a well-constructed allocation must avoid concentrations of calls or distributions at the same time: ‘We want a high diversification of private asset classes and sub strategies that do not distribute or raise capital all together and that do not react in the same way to the macro context.’
Evergreen and ELTIF 2.0: new tools, new complexities
The adoption of evergreen structures is growing rapidly in Europe, also supported by the revised version of the ELTIF framework. Evergreen vehicles maintain a stable allocation to private markets and offer the possibility of efficiently reallocating capital from distributions between cash/money markets and new private assets investments according to market conditions.
But liquidity management is one of the most sensitive issues. Faget highlights that it is necessary to imagine stress scenarios and check their resilience: ‘The stress tests we operate are crucial: if a lot of investors ask for redemptions during a drawdown, what happens?’ From this question arises the need to precisely structure the liquid pocket of the fund, balancing monetary or listed instruments with the distributions generated by private assets and with the possibility of using the secondary market in critical moments. Add to this more formal mechanisms, such as gating, lock ups and notice periods for redemptions, which can protect the vehicle in case of sudden stresses.
Another complex dimension is asset valuation. In evergreen vehicles, the most common NAV dealing frequency is quarterly, which imposes a higher level of rigour than traditional closed funds, because the correct valuation of the NAV becomes the focus for a healthy management of redemptions and new subscriptions. ‘Robust valuation governance is needed,’ says Faget, precisely to ensure transparency and reliability even in periods of volatility or change in the cycle.
In this context, a multi private asset approach can help to make the operation of an evergreen fund more fluid. When private equity goes through periods of lower distributions, components such as private debt or infrastructure can offset this, mitigating liquidity shortages and keeping flows more stable. It is a complex balance, but increasingly central in the design of solutions designed to provide access to private markets to a wider public and with different liquidity needs than traditional institutional investors.
Adaptative asset allocation and rigorous due diligence
VEGA IS’ investment method is based on a combination of macroeconomic analysis, market cycle study, definition of asset allocation beliefs and selection of what the team believes to be the best funds, both internal and external, through a structured process of due diligence and ESG screening.
The business cycle is at the heart of the investment philosophy: ‘The entry point counts in private markets,’ recalls Faget, and the variations in vintage returns in European private equity demonstrate this. Every quarter, VEGA IS’ investment committees update their convictions on the distribution between asset classes and sub strategies, guiding new subscriptions and redistribution of flows where the risk/return ratio is more attractive.
This means that a well-structured investment programme is not static, but evolves along the market cycle. As the manager points out: ‘New subscriptions and distributions to be redeployed go where we see the best future risk/return ratio: as an exemple we currently allocate more to LBO strategies, tomorrow more venture capital, or more private subordinated credit based on rates and inflation.’
From a portfolio construction point of view, VEGA IS’ team suggests an allocation with approximately 85% invested in private assets and 15% invested in cash/money markets, with a strong weight of private equity (50%), followed by private debt, infrastructure and real estate. This is an illustrative model, but useful to understand how a multi private asset vehicle can be structured.
Faget also points to a particularly relevant figure for the understanding of the long-term financial objectives: ‘A programme with 15% liquidity can aim at a multiple of about 2.5 × in 10 years,’ using median assumptions and without considering any excess return resulting from the selection of the best GPs.
How to build a private assets investment programme
Private markets are becoming an essential component in the portfolios of the most advanced investors. As Philippe Faget points out, ‘private assets can increase returns, reduce correlations and offer inflation sensitive flows,’ and it is precisely this combination of characteristics that makes them increasingly central in an environment of macroeconomic uncertainty and the search for long term stability.
However, building a truly effective exposure requires a much more comprehensive approach than in the past. Diversification cannot be limited to the choice between private equity, private debt or infrastructure: it must extend to strategies, vintages, managers and geographies, distributing risk through different economic cycles. In private markets, concentration is a silent risk, which can manifest itself both in cash flows and in the timing of distributions; for this reason, a well-designed allocation must ensure balance, predictability and careful management of pricing.
Another crucial dimension is liquidity. The rise of evergreen structures and the introduction of Eltif 2.0 have opened up new opportunities, but they have also emphasised the need for solid governance, able to face the challenges of quarterly dealing, repayment windows and the dynamics of secondary markets. Liquidity, in this context, is not a simple cushion: it is a strategic element that allows allocations to be kept stable and flows to be redeployed in a manner consistent with the evolution of the cycle.
In short, building a private assets programme today means combining strategic vision and operational discipline. It means integrating different asset classes into a coherent structure, managing liquidity carefully, analysing the market cycle with lucidity and choosing precisely the partners with or in which to invest. It is a complex but necessary process, because more and more investors - wholesale, retail and institutional - are realising that the future of diversification has a lot to do with private markets.