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Private Markets: FOMO vs. Financial Reality

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  Published in Stocks and Investing on Tuesday, February 17th 2026 at 17:24 GMT by InvestmentNews
      Locale: UNITED STATES

Tuesday, February 17th, 2026 - The allure of exclusive, high-return investments in the private market is growing, and financial advisors are increasingly fielding questions from clients fearing they are missing out on the action. However, according to Kaitlin Hendrix, Head of Private Markets Research at Common Sense Funds, the vast majority of investors are likely better off sticking to the publicly traded markets.

Hendrix, speaking on a panel at the recent Wealth Management Innovation Summit in San Francisco, emphasized that while private market investments - encompassing private equity, venture capital, real estate, and private credit - can deliver substantial returns, they are fraught with complexities and risks that make them unsuitable for most individual investors. The "fear of missing out," or FOMO, is driving demand, but a rational assessment of the landscape reveals a different picture.

"We're seeing a significant uptick in interest in private markets, fueled by headlines touting impressive returns from a handful of successful deals," Hendrix explained. "Clients are naturally curious and want to know why they aren't participating. But what they aren't seeing is the full picture - the multitude of deals that underperform or fail entirely."

This selectivity is a key point. Media coverage frequently focuses on the 'winners' - the companies like SpaceX, Airbnb or Stripe before their eventual IPOs or acquisitions - creating a distorted perception of overall private market performance. It's a classic case of survivorship bias, where only the successes are highlighted, masking the failures.

The Cost of Exclusivity

The financial implications of private market investments are substantial. Private equity and venture capital firms traditionally operate on a "2 and 20" fee structure: a 2% annual management fee based on the total committed capital, plus 20% of any profits generated. These fees, while standard, significantly eat into returns.

"Even if a private equity fund delivers a 15% annual return, after fees, investors are only realizing 11.2%," Hendrix pointed out. "That's a considerable drag on performance, and it needs to be factored into any potential investment decision." Furthermore, private credit, a rapidly expanding segment of the private market, may offer seemingly higher yields, but these often come with increased credit risk and less transparency.

Illiquidity: A Significant Drawback

Perhaps the most significant drawback of private market investments is their illiquidity. Unlike stocks or bonds, which can be bought and sold on established exchanges, private market investments are locked up for extended periods - typically 5 to 10 years, or even longer.

"There's no readily available secondary market for these investments," Hendrix stated. "If you need to access your capital unexpectedly, you may be forced to sell at a substantial discount, or you may not be able to sell at all." This lack of liquidity can be particularly problematic during times of economic uncertainty or personal financial hardship.

The Power of Public Market Diversification

So, what does Hendrix recommend for investors experiencing private market FOMO? Her advice is refreshingly simple: "Less is more."

"Focus on building a well-diversified portfolio within the public markets," she urges. "Invest in a broad range of stocks, bonds, and other asset classes to reduce risk and maximize long-term returns." Public markets offer the benefit of liquidity, transparency, and relatively low costs, making them an ideal foundation for most investment strategies.

Hendrix suggests exploring broad-based index funds and ETFs as a cost-effective way to achieve diversification. She also emphasizes the importance of understanding any investment before committing capital, regardless of whether it's in the public or private market.

"Do your due diligence. Understand the risks involved. And don't chase returns based on hype or anecdotal evidence," she cautions. "For the vast majority of investors, a disciplined approach to public market investing will deliver superior long-term results with far less complexity and risk."

The trend toward private market investment appears to be gaining steam, but advisors like Hendrix are providing a vital counterpoint, reminding investors that solid fundamentals and prudent diversification remain the cornerstones of successful investing. The allure of exclusivity shouldn't overshadow the benefits of accessibility, liquidity, and transparency offered by the public markets.