Private Market Diversification
Most advisory portfolios are built around a simple mix of stocks and bonds. This approach is easy to scale and manage, which is why it dominates traditional wealth management.
The largest and most sophisticated pools of capital take a different approach. Family offices and major endowments allocate meaningful portions of their portfolios to private markets alongside public equities and fixed income.
As shown in the allocations to the right, these investors diversify well beyond a traditional 60/40 framework. This is not about maximizing returns in isolation or replacing public markets entirely. Even the most sophisticated investors use private investments as part of a broader portfolio, balancing liquidity, risk, and long-term objectives.
Valorem helps qualified clients evaluate where private investments may be appropriate, how much exposure makes sense given their circumstances, and how those investments fit within a broader, diversified portfolio over time.
Incentives Shape Advice
Many advisors avoid private investments entirely. Others offer them, but with compensation that changes depending on what a client invests in.
When fees are variable, incentives shift. Additional management fees, placement fees, or participation in performance fees, often referred to as carried interest (a share of the investment’s profits), can create pressure to recommend what pays more, not what fits best. Even well intentioned guidance can be affected when different recommendations are paid differently.
At Valorem, compensation does not change based on product selection. There are no additional advisory fees, management fees, or profit participation layered on when private investments are used. Advice remains consistent whether capital is allocated to public markets, private opportunities, or held in cash.
That incentive alignment matters in practice. Large private investments are typically designed for very large checks, and variable compensation can encourage oversizing allocations simply to justify access. Without that pressure, private investments can be evaluated calmly and incorporated only where they fit, at sizes that make sense within a diversified portfolio.
Private Investment
Potential Fee Layers
Management Fee
Fee charged by the advisor or fund manager for actively managing your investments and making investment decisions on your behalf.
Upfront Commission
One-time payment to the advisor when a client invests, often a percentage of the investment amount.
Placement Fee
Fee paid by the fund to the advisor for bringing in investors, which can create incentives to recommend investments that pay more rather than fit best.
Fund Expenses
Operational costs of running the fund including legal, accounting, administrative expenses, and other overhead charged to investors.
Carried Interest
A share of investment profits paid to the fund manager, typically 20% of gains above a certain threshold.
When compensation varies by product, it can create pressure to recommend what pays more rather than what fits best.
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Disclaimer
Private market investments involve risk and may not be suitable for all investors. Valorem does not guarantee outcomes or returns.
The Investment Allocation Gap
How the Ultra-Wealthy Invest Differently
Family Offices
Goldman Sachs 2025 Survey
Harvard Endowment
2025 Annual Report
