The conversation around private markets has shifted from whether to add an allocation to how to design portfolios that incorporate illiquid assets responsibly. Brian Griggs, head of portfolio strategy at Nuveen in New York, says advisors are increasingly focused on the role each private investment plays, its impact on liquidity, and whether it improves after-tax, risk-adjusted outcomes for clients.
Griggs, who works with RIAs, wealth managers, and family offices, notes that the era of treating private markets as a simple add-on to a stock-and-bond portfolio is over. Instead, advisors are adopting a unified risk framework that spans public and private holdings, accounting for liquidity terms, valuation methodology, tax treatment, and correlation across the entire portfolio. Education remains a limiting factor, he says, with success depending less on access than on proper sizing, funding, and explanation.
Funding private allocations
One of the most consequential decisions is how to fund a private allocation. Griggs argues that the source of capital should start with client objectives, not generic target allocations. For income-oriented goals, funding from the fixed income sleeve may make sense; for long-term growth, equities might be the source. The trade-offs are layered, as private allocations can enhance income, diversification, or inflation sensitivity while introducing illiquidity, manager dispersion, valuation lag, and cash-flow uncertainty.
Even with public fixed income yields above long-term medians, advisors are finding roles for core real estate, middle market direct lending, and farmland. Direct lending offers contractual income and floating-rate exposure; core real estate provides potential inflation sensitivity; farmland adds differentiated real asset exposure. Griggs cautions that these are not interchangeable yield substitutes, and each must be evaluated in the context of the full portfolio.
Liquidity planning first
Griggs recommends starting with a liquidity budget rather than a target allocation. This means identifying near-term spending needs, emergency reserves, required distributions, potential capital calls, lockups, redemption terms, and the client's behavioral comfort with illiquidity during market stress. The allocation should then be stress-tested against the client's broader financial plan, asking not just how much the client can allocate, but how much illiquidity the plan can comfortably absorb.
As access expands through interval funds, evergreen structures, and lower minimums, suitability has become more important, not less. Private markets are generally suited for clients with stable liquidity needs, a long horizon, sufficient portfolio size to diversify across managers and vintages, and the ability to stay committed when pricing is less transparent. This profile does not describe every high-net-worth client, let alone mass affluent investors.
Misconceptions persist
The most persistent misconception, Griggs says, is that private markets are simply higher-return versions of public assets. In reality, they come with different liquidity terms, valuation practices, fee structures, and manager-selection risk. Another misconception is that lower reported volatility means lower economic risk; appraisal-based valuations can smooth the ride on paper but do not eliminate underlying credit, property, leverage, or business-cycle risk.
Addressing these misconceptions requires side-by-side portfolio analysis and clear expectation-setting. Advisors need to show clients how a private allocation changes income, risk, liquidity, taxes, concentration, and downside exposure. Griggs emphasizes helping clients understand what they own, why they own it, and what trade-offs they are accepting.
Industry data underscores the growing importance of private markets in advisor portfolios. Cerulli Associates projects advisor-held private capital to jump $2 trillion by 2030, while recent reports highlight private credit funds trading at steep discounts as redemptions surge. These trends reinforce the need for disciplined liquidity planning and suitability assessment.
