Private Capital (Private Markets)

What private capital includes

The core strategies are:

• Private equity: buyouts, growth equity and related control or minority equity investments in unlisted companies.
• Venture capital: minority equity in young, high-growth companies.
• Private credit: direct lending, mezzanine, distressed and asset-based lending by non-bank lenders.
• Private real assets: real estate, infrastructure and natural resources.

Secondaries, co-investment and funds of funds are ways of accessing these strategies rather than separate underlying asset classes. Secondaries buy existing fund interests or portfolio assets; co-investments place capital alongside a fund in a single deal; funds of funds commit to other managers' funds.

Boundaries: private capital, private markets and alternatives

"Private capital" and "private markets" are used interchangeably by most investors and data providers; where a distinction is drawn, "private markets" describes where transactions happen and "private capital" the money and the managers that deploy it. Both are a subset of alternative investments. Hedge funds are alternatives but not private capital: they mostly trade listed instruments and offer periodic redemption. Private equity is one strategy within private capital, not a synonym for it.

Two tests are in use for deciding whether an exposure counts, and a figure should say which it uses:

• Asset test: the underlying asset is privately negotiated and not traded on an exchange. Under this test the loan book of a listed business development company (BDC) is private credit.
• Vehicle test: the investor holds an interest in a private, unregistered vehicle. Fundraising and assets-under-management statistics usually follow this test, which excludes listed and registered vehicles even when their assets are private.

Vehicles: not only closed-end limited partnerships

The closed-end limited partnership is the traditional structure: limited partners commit capital, the general partner draws it through capital calls over an investment period, charges a management fee and carried interest, and returns proceeds as investments are sold. It is not the only route. Private capital is also held through evergreen and semi-liquid funds with periodic subscriptions and limited redemptions; registered vehicles such as BDCs, interval funds and tender-offer funds; European long-term investment funds (ELTIFs) and UK long-term asset funds; separately managed accounts (SMAs) and funds of one; co-investments; and direct investments made by an investor's own team.

Jurisdiction and status

A US private fund is not a registered investment company. It stays outside the Investment Company Act through one of two exclusions: section 3(c)(1) caps beneficial ownership at 100 persons, or 250 where the fund is a qualifying venture capital fund, and bars a public offering; section 3(c)(7) requires every owner to be a qualified purchaser and likewise bars a public offering. Interests are usually sold in private placements under Rule 506(b) or 506(c) of Regulation D. Advisers register with the Securities and Exchange Commission (SEC), or, below the SEC thresholds, generally with their home state, or rely on an exemption from SEC registration: the venture capital fund adviser exemption, or the private fund adviser exemption, which under SEC Rule 203(m)-1 is available to an adviser with its principal office and place of business in the United States that acts solely as an adviser to qualifying private funds and manages private fund assets of less than $150 million (an adviser based outside the United States qualifies if its only US-person clients are qualifying private funds and the assets it manages at a US place of business are solely private fund assets of less than $150 million). Advisers relying on either exemption still file as exempt reporting advisers. Once a registered adviser's private fund assets reach $150 million it must also file Form PF, a confidential report (threshold as of 1 October 2026; a joint SEC and Commodity Futures Trading Commission proposal of April 2026 would raise it to $1 billion). In the EU, managers of private capital funds are generally alternative investment fund managers under the Alternative Investment Fund Managers Directive (AIFMD), as amended by Directive (EU) 2024/927, whose transposition deadline was 16 April 2026.

Measuring the size of private capital

There is no single authoritative figure for the size of private capital. Estimates differ in what they count (NAV only, or NAV plus uncalled commitments, often called dry powder), which strategies and vehicles they include, and whether fund-of-funds and secondaries holdings are counted twice. Private credit illustrates the spread among official sources: a Federal Reserve staff note of 23 February 2024 put private credit at nearly $1.7 trillion; the April 2024 Global Financial Stability Report of the International Monetary Fund (IMF) put assets plus committed capital at about $2.1 trillion globally in 2023; an article of 11 March 2025 in the Quarterly Review of the Bank for International Settlements (BIS) put private credit fund assets under management above $2.5 trillion by early 2025. The three figures measure different things at different dates and should not be read as a growth series.

Regulatory fund counts answer a different question again. The SEC's Private Fund Statistics, aggregated from Form PF filings, counted 58,891 private funds reported on Form PF in the fourth quarter of 2025, with gross assets of $29.6 trillion and net assets of $19.0 trillion. These figures follow the vehicle test, include hedge funds and cover only funds whose advisers file Form PF, so they are not a measure of private capital as defined here.

How investors use the category

Asset owners set a policy allocation to private capital, or to its component strategies, and then manage three things that public portfolios do not require. Pacing: commitments are made years before capital is drawn, so commitment pacing models project calls, distributions and NAV. Liquidity: unfunded commitments are a claim on future cash that must be met when called. Measurement: performance is reported as money-weighted IRR, TVPI and DPI, and compared with listed markets through public market equivalent methods.

Academic evidence on whether private capital outperforms public markets is strategy-specific and depends on data and period. For private equity, Kaplan and Schoar (2005) found average net-of-fee fund returns roughly equal to the S&P 500 with large dispersion and strong persistence across a manager's funds; Harris, Jenkinson and Kaplan (2014), with Burgiss data, estimated that the average US buyout fund beat the S&P 500 by more than 3% a year; Phalippou and Gottschalg (2009) put average net-of-fee performance in their sample roughly 3% a year under the S&P 500. The results are not interchangeable and none describes private capital as a whole.

Not the same as

• Private Equity (PE): Private equity is one strategy within private capital (equity ownership of unlisted companies). Private capital also includes private credit, real assets and venture capital.
• Alternative Investments (Alternative Assets): Alternatives is the wider category: it adds hedge funds and listed or liquid alternative vehicles to private capital.
• Closed-End Fund: The closed-end fund is the traditional private capital vehicle, but evergreen funds, BDCs, SMAs, co-investments and direct investments are private capital too.

How it is classified

• State whether a figure applies the asset test (underlying assets are privately negotiated and unlisted) or the vehicle test (the investor holds a private, unregistered vehicle).
• Classify secondaries, co-investments and funds of funds by their underlying strategy when measuring exposure, and as access routes when describing how capital was deployed.
• Exclude hedge funds that trade listed instruments; include them only for the portion of assets that is private.
• Private real estate funds and direct property are private capital; listed real estate investment trusts (REITs) are public real estate exposure.

Common mistakes

• Stating that all private capital is invested through closed-end limited partnerships. Evergreen and semi-liquid funds, BDCs, SMAs, co-investments and direct investments are all private capital.
• Calling private funds "registered funds". US private funds are, by definition, outside the Investment Company Act registration regime.
• Treating "private capital" and "private equity" as synonyms.
• Adding NAV and dry powder together and calling the total "assets" without saying so.
• Summing fund-of-funds and secondaries holdings with the primary funds they hold, which counts the same assets twice.
• Comparing private capital IRRs directly with time-weighted index returns.

Edge cases

• A listed BDC or listed private equity company holds private assets in a public vehicle; it is private capital under the asset test and outside it under the vehicle test.
• Broadly syndicated loans are privately originated but actively traded; most analyses place them outside private credit.
• A hedge fund that originates private loans, or holds side-pocketed private positions, sits on the boundary.
• Continuation vehicles hold assets the sponsor already owned; they are a secondaries transaction and a new private fund at the same time.

Questions

Sources

1. 15 U.S.C. 80a-3 - Definition of investment company (Investment Company Act sec. 3, incl. 3(c)(1) and 3(c)(7)). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 3(c)(1), 3(c)(7) — supports: Private funds rely on exclusions from the definition of investment company; 100/250 beneficial-owner limit; qualified-purchaser test
2. 17 CFR 270.3c-7 - Inflation-adjusted definition of qualifying venture capital fund. U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), Adopted 89 FR 70479 (2024-08-30); effective 2024-09-30. Status: in force (checked 2026-10-01). 17 CFR 270.3c-7(a) — supports: Qualifying venture capital fund cap of $12,000,000 (effective 2024-09-30) for the 250-owner variant
3. 17 CFR 230.506 - Exemption for limited offers and sales without regard to dollar amount of offering (Rule 506(b) and 506(c)). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2021-06-09. Status: in force (checked 2026-10-01). 17 CFR 230.506(b), 230.506(c) — supports: Rule 506(b) and 506(c) private placements
4. 15 U.S.C. 80b-3 - Registration of investment advisers (Advisers Act sec. 203, incl. 203(l) and 203(m)). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 203(l)(1), 203(m)(1)-(2) — supports: Venture capital fund adviser exemption; private fund adviser exemption (solely private funds, US AUM under $150 million); reporting by exempt advisers
5. 15 U.S.C. 80b-3a - State and Federal responsibilities (Advisers Act s.203A). U.S. Congress (US Code via LII), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 203A(a)(1)-(2) — supports: Advisers below the statutory AUM thresholds are generally regulated by their home state rather than registered with the SEC
6. 17 CFR 275.204-4 - Reporting by exempt reporting advisers. U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; no substantive amendment since eCFR baseline. Status: in force (checked 2026-10-01). 17 CFR 275.204-4(a) — supports: Exempt reporting advisers file reports on Form ADV
7. 17 CFR 275.204(b)-1 - Reporting by investment advisers to private funds (Form PF filing obligation). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2025-03-12. Status: in force (2024 Form PF amendments not yet in compliance) (checked 2026-10-01). 17 CFR 275.204(b)-1(a) — supports: Form PF filing threshold for registered advisers
8. Private Fund Statistics (Division of Investment Management, aggregated Form PF data). U.S. Securities and Exchange Commission, Page accessed 2026-10-01; latest quarter shown 2025Q4. Status: current (checked 2026-10-01). Headline figures, 2025Q4 (page accessed 2026-10-01) — supports: 58,891 private funds reported on Form PF in 2025Q4; $29.6 trillion gross assets; $19.0 trillion net assets; coverage limited to advisers that file Form PF
9. Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD). European Parliament and Council, Official Journal of the EU, L 174, 1.7.2011, Adopted 8 June 2011; transposition by 22 July 2013. Status: In force; amended by Directive (EU) 2024/927 (AIFMD II) (checked 2026-10-01). Art. 4(1)(a) — supports: EU AIF and AIFM framework
10. Directive (EU) 2024/927 amending Directives 2011/61/EU and 2009/65/EC (AIFMD II). European Parliament and Council, Official Journal of the EU, L series, 26.3.2024, Adopted 13 March 2024; Member States to adopt and apply measures by 16 April 2026 (some reporting provisions later). Status: In force; transposition deadline passed 16 April 2026; national transposition status varies by Member State (checked 2026-10-01). Art. 3(1) — supports: AIFMD II: Member States to adopt, publish and apply by 16 April 2026
11. Private Credit: Characteristics and Risks. Fang Cai; Sharjil Haque, Board of Governors of the Federal Reserve System (FEDS Notes), 23 February 2024. Status: Published (checked 2026-10-01). FEDS Notes, 2024-02-23 — supports: Private credit nearly $1.7 trillion
12. Global Financial Stability Report, April 2024, Chapter 2: The Rise and Risks of Private Credit. IMF staff (team led by Caio Ferreira and Nobuyasu Sugimoto), International Monetary Fund, April 2024 GFSR ("The Last Mile"), published 16 April 2024. Status: Published (checked 2026-10-01). GFSR April 2024, ch. 2, growth section (Figure 2.2, panel 2; footnote 3) — supports: Private credit assets about $2.1 trillion globally in combined assets and undeployed capital commitments in 2023
13. The global drivers of private credit. Fernando Avalos; Sebastian Doerr; Gabor Pinter, BIS Quarterly Review, March 2025, 11 March 2025. Status: Published (checked 2026-10-01). Introduction, opening paragraph (article of 2025-03-11) — supports: Private credit fund AUM above $2.5 trillion by early 2025
14. Private Equity Performance: Returns, Persistence, and Capital Flows. Steven N. Kaplan; Antoinette Schoar, The Journal of Finance, Vol. 60(4), pp. 1791-1823, August 2005. Status: Published (journal paywalled; NBER w9807 working paper) (checked 2026-10-01). Abstract — supports: Average net fund returns roughly equal to the S&P 500; heterogeneity; persistence
15. Private Equity Performance: What Do We Know?. Robert S. Harris; Tim Jenkinson; Steven N. Kaplan, The Journal of Finance, Vol. 69(5), pp. 1851-1882. Status: Published (paywalled) (checked 2026-10-01). Abstract — supports: US buyout funds outperformed the S&P 500 by more than 3% a year (Burgiss data)
16. The Performance of Private Equity Funds. Ludovic Phalippou; Oliver Gottschalg, The Review of Financial Studies, Vol. 22(4), pp. 1747-1776. Status: Published (paywalled) (checked 2026-10-01). Abstract — supports: Average net performance about 3% a year below the S&P 500 in their sample
17. 15 U.S.C. 80b-4 - Reports by investment advisers (Advisers Act s.204), incl. s.204(b) records and reports of private funds. U.S. Congress (US Code via LII), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). 15 U.S.C. 80b-4(b)(8), (b)(10) — supports: Form PF reports confidential: SEC may not be compelled to disclose; FOIA exemption
18. 17 CFR 275.203(m)-1 - Private fund adviser exemption. U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2018-03-12. Status: in force (checked 2026-10-01). 17 CFR 275.203(m)-1(a)-(b) — supports: Private fund adviser exemption conditions for US and non-US advisers
19. Form PF; Reporting Requirements for All Filers (joint proposed rules), 91 FR 22232. U.S. Securities and Exchange Commission and Commodity Futures Trading Commission (Federal Register via govinfo), Proposed 2026-04-20; published 2026-04-24; comments due 2026-06-23. Status: proposed (checked 2026-10-01). 91 FR 22232, Table 1a — supports: Pending proposal to raise the Form PF filing threshold from $150 million to $1 billion

• Co-Investment
• Closed-End Fund
• Evergreen Fund
• Commitment Pacing
• Illiquidity Premium
• Alternative Investments (Alternative Assets)
• Private Equity (PE)
• Venture Capital (VC)
• Private Credit
• Real Estate (Asset Class)
• Infrastructure Investing
• Secondaries