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Just when people are more worried than ever about their investments, even to the point of cashing them out, BlackRock Inc. CEO Larry Fink says it’s time to go all in.
But he has a specific investment in mind: private equity, also known as alternative investments.
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BlackRock (BLK) has long been known for its low-cost stock index funds, or ETFs, but Fink sees a big future in higher-fee private assets that aren’t listed on the stock markets.
“The solution isn’t to abandon markets,” he wrote in his annual letter to investors.
“It’s to expand them, to finish the market democratization that began 400 years ago and let more people own a meaningful stake in the growth happening around them.”
Fink has overseen BlackRock’s rise to the world’s largest money management firm with more than $10 trillion in assets. He also serves on the board of the World Economic Forum, and believes opening up private-equity markets will help reduce the gap between rich and poor.
More asset management firms offering private equity
Fink notes that up until recently, only wealthy people could invest in infrastructure projects like data centers, ports and power grids — let alone real estate or private credit.
That’s because they aren’t publicly traded on stock exchanges. This is where private equity comes in.
Fink’s firm is among a growing number of asset management companies — including Blackstone (BX), Apollo (APO) and KKR (KKR) — offering regular investors access to private equity.
To take the lead, last year BlackRock acquired Global Infrastructure Partners for $12.5 billion and data firm Prequin for $3.3 billion. The firm is also wrapping up a $12-billion deal for private credit company HPS Investment Partners.
Together, these investments will help BlackRock manage $600 billion in alternative assets.
What do these developments mean for your portfolio?
While private equity offers significant upside potential, it also requires a longer-term commitment and comes with higher risks than public equities.
BlackRock is almost singular in its investment power. But individual American investors can still access private equity through specific funds.
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For instance, real estate as an asset class offers portfolio diversification that can protect against stock volatility, bond sell-offs and public-market rumblings.
One option for investing in private equity is through Fundrise.
As America’s largest direct-to-consumer private markets manager, Fundrise gives you access to a portfolio of alternative investment opportunities spanning real estate, private credit and venture capital. The Fundrise Flagship Fund gives you exposure to over 4,700 single-family homes and 2,500+ residential properties.
With over two million investors and over $7 billion in real estate assets alone, Fundrise could be an accessible way to diversify your portfolio.
You can start investing in less than five minutes with as little as $10.
Investors looking to earn passive income through real estate-backed lending — without the hassle of property management — can also do so through private credit.
The Arrived Private Credit Fund presents the opportunity to invest in hand-picked real estate debt investments with a track record of generating risk-adjusted returns. The Private Credit Fund has historically paid an annualized dividend yield of 8.1%.
Backed by residential properties and personal guarantees, the fund provides investors with monthly payouts and flexible liquidity.
But, the U.S. home equity market also has a strong track record. This $36 trillion market has historically been the exclusive playground of large institutions.
Homeshares is changing the game by helping accredited investors gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property.
The fund focuses on homes with substantial equity, utilizing Home Equity Agreements (HEAs) to help homeowners access liquidity without incurring debt or additional interest payments.
With risk-adjusted internal returns ranging from 12% to 18%, the U.S. Home Equity Fund could unlock lucrative real estate opportunities, offering retail investors a low-maintenance alternative to traditional property ownership — with a minimum investment of $25,000.
Investing in commercial real estate offers another unique opportunity to diversify your portfolio, potentially generate cash flow and build long-term wealth.
If you’re an accredited investor looking for institutional-level real estate opportunities, a platform like First National Realty Partners (FNRP) may be worth considering.
With a minimum investment of $50,000, accredited investors can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart, which provide essential goods to their communities. Thanks to triple net leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into their potential returns.
Weighing the benefits and risks of private equity in your portfolio
Fink suggested that the traditional 60/40 portfolio of stocks and bonds may no longer be enough to diversify effectively. Going forward, he sees a new standard: 50% in stocks, 30% in bonds and 20% in private assets like real estate, private credit and infrastructure.
While these new investment opportunities are exciting, it’s important to stay mindful of the risks.
To keep up with changes in private-market investments and diversification, consult trusted sources like the SEC for insights on investment risks and regulations, the U.S. Department of Labor for 401(k) guidance and FINRA for educational tools.
Before you make any moves, it’s a good idea to speak with a financial advisor to help figure out which private-equity investment fits with your risk tolerance and long-term goals.
Finding a financial advisor that suits your specific needs and financial goals is simple with Vanguard.
Vanguard’s hybrid advisory system combines advice from professional advisers and automated portfolio management to make sure your investments are working to achieve your financial goals.
With a minimum portfolio size of $50,000, this service is best for clients who already have a nest egg built and would like to try to grow their wealth with a variety of different investments. All you have to do is set up a consultation with a Vanguard advisor, and they will help you set a tailored plan and stick to it.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
