Private Markets Over Public Markets in Times of Volatility

Periods of market turbulence reveal an important feature of finance: liquidity accelerates price discovery.

Sharp movements in energy prices and government bond yields triggered rapid repositioning across global portfolios, leading several large multi-strategy hedge funds to report losses after macro trades reversed unexpectedly.

The episode illustrates how quickly liquid markets process new information. Equity indices can move sharply within hours, bond markets can adjust in minutes, and macro strategies can see significant performance swings when assumptions about inflation, interest rates or energy supply change.

In this sense, the volatility itself is not unusual. Public markets are designed to absorb information rapidly and translate it into prices.

What the episode highlights, however, is the structural difference between public and private markets.

While liquid portfolios react immediately to new information, private assets typically move far more slowly.

Understanding why requires examining the mechanics of how the two systems operate.

Public markets operate through continuous trading. Every piece of new information, economic data, policy statements, geopolitical developments or investor sentiment can trigger immediate transactions.

This liquidity is a core strength of public markets. It allows investors to allocate capital efficiently and to adjust risk exposures in real time.

However, the same mechanism can also amplify volatility.

When uncertainty rises, liquidity does not disappear, but it can become directional. Large volumes of capital attempt to reposition simultaneously, producing rapid swings in prices across equities, bonds and commodities.

For portfolio managers operating in liquid markets, these movements are unavoidable. Mark-to-market pricing ensures that gains and losses are realised immediately.

This transparency is essential to the functioning of global finance.

But it also means that public portfolios can appear significantly more volatile during periods of uncertainty.

Private markets operate under a fundamentally different architecture.

Assets such as private equity investments, infrastructure projects, real estate holdings or private credit portfolios are not traded continuously. Instead, they are held within longer investment cycles and valued periodically rather than daily.

Several structural characteristics follow from this design.

Lower valuation frequency
Private assets are typically marked quarterly based on underlying cash flows, comparable transactions and independent valuation methodologies.

Longer capital commitments
Investors commit capital for multi-year horizons and cannot redeem positions immediately when markets become unsettled.

Active ownership structures
Private investors often exercise operational influence over the assets they own, allowing them to adjust strategy, restructure financing or manage costs over time.

These features produce a markedly different pattern of behaviour during volatile market periods.

Where public markets reprice risk immediately, private markets absorb it gradually.

The relative stability of private markets during periods of turbulence is therefore not accidental. It reflects the longer time horizon embedded within their structure.

Infrastructure assets, logistics networks, agricultural land or long-term credit portfolios do not typically experience sudden changes in economic value simply because financial markets become unsettled.

Their underlying cash flows evolve more slowly.

In practice, this means that temporary dislocations in public markets do not necessarily force immediate repricing of long-term assets, allowing investors to manage through volatility rather than crystallising losses.

For long-horizon investors, family offices, pension funds and institutional capital, this structural stability can be valuable. It reduces the likelihood that short-term volatility forces premature asset sales or distorts investment decisions.

Over the past decade, this characteristic has contributed to a significant expansion of private markets globally, with assets under management exceeding €15tn across private equity, private credit, infrastructure and real estate strategies.

Yet it would be inaccurate to interpret this stability as an absence of risk.

Private markets do not avoid volatility.

They process it differently.

Because assets are valued periodically rather than continuously, price discovery occurs over longer intervals. Economic shocks that affect financing conditions or corporate cash flows may take several quarters to be reflected in valuations.

This timing difference can create the appearance of stability during short-term market dislocations.

But it also requires disciplined governance and robust valuation frameworks.

Independent appraisals, transparent reporting and conservative capital structures are essential to ensure that valuations remain credible.

For investors, the distinction is straightforward.

Public markets reveal volatility immediately.
Private markets reveal it gradually.

Neither approach is inherently superior; they simply operate on different timelines.

For sophisticated investors, the implication is structural rather than tactical.

Public markets and private markets perform different roles within a diversified portfolio.

Public markets provide liquidity, transparency and continuous price discovery. They allow investors to reposition capital quickly and to respond dynamically to macroeconomic developments.

Private markets provide patient capital. They allow investors to participate in projects and businesses whose value creation occurs over years rather than trading sessions.

When volatility rises in global markets, as it periodically does, the interaction between these two systems becomes more visible.

Liquid assets adjust immediately.
Illiquid assets adjust over time.

Understanding this difference allows investors to design portfolios that balance responsiveness with long-term stability.

Financial markets operate across multiple layers of liquidity and time horizons.

Short-term trading capital processes information instantly, often amplifying volatility during periods of uncertainty. Long-term capital, by contrast, operates through slower cycles of investment, operational management and valuation.

Both are essential components of the financial system.

For investors seeking resilience in an environment characterised by geopolitical uncertainty, inflation, volatility and shifting interest-rate expectations, the key question is therefore not whether private markets are inherently safer than public markets.

It is whether portfolio structures appropriately balance liquidity, time horizon and governance discipline.

Public markets provide immediacy.

Private markets provide time.

For long-term investors, time can be one of the most valuable assets a portfolio can possess.