Private equity has been in the headlines lately, following the recent executive order that opened the door for these investments to be included in certain 401(k) plans. While this development reflects a broader industry trend towards making a wider range of investments available to everyday investors, it also raises important questions about suitability, structure, and oversight.
For decades, private equity was reserved for institutional investors such as pension funds, endowments, and foundations, with the knowledge and resources to evaluate illiquid and complex investments. Private equity can offer access to companies that are not found in traditional portfolios, providing potential diversification and return benefits. However, it also comes with a unique set of challenges and risks that should be professionally navigated.
Manager Selection Matters
The impact of these challenges is best illustrated by the wide range of returns between top-performing and bottom-performing private equity managers. The chart below highlights this contrast between top and bottom performing managers in private equity compared to traditional U.S. stocks and bonds.
Source: Burgiss, Morningstar, MSCI, PivotalPath, J.P. Morgan Asset Management.
Global Large Cap Equities and Global Bond are based on the Morningstar Global Large Stock Blend and Global Bond (not hedged) categories, respectively. Global Core Real Estate is based on the MSCI Global Property Fund Index. Global Private Credit, Global Non-core Real Estate, Global Private Equity and Global Venture Capital are based on indices from the MSCI Private Capital Universe. Hedge Funds are based on the PivotalPath index. Manager dispersion is based on annual returns over the 10-year period indicated for: Global Large Cap Equities, Global Bond and Hedge Funds. *Manager dispersion is based on annual returns over the 10-year period ending 1Q25 for Global Core Real Estate. Manager dispersion is based on the 10-year internal rate of return (IRR) ending 1Q25 for: Global Private Credit, Global Non-core Real Estate, Global Private Equity and Global Venture Capital. Past performance is not a reliable indicator of current and future results.
The difference is striking. Selecting the wrong manager, mutual fund, or ETF for your stocks and bonds might lead to a small disappointment, often a difference of just 1 to 2 percent. In private equity, however, manager selection can make or break results, with performance gaps of nearly 20 percent between top and bottom managers.
This variability highlights why success in private equity depends less on accessing the overall type of investment itself and more on the skill, discipline, and experience of the underlying manager.
Our Approach
At Alaska Wealth Advisors, we incorporate private equity thoughtfully as part of a diversified investment strategy, always beginning with suitability. Before any recommendation is made, we assess whether private equity aligns with each client’s long-term goals, risk tolerance, time horizon, and liquidity needs. There is no one-size-fits-all solution.
From there, we focus on managers we consider to be top tier with a proven track record of strong, consistent results across market cycles. Beyond past performance, we evaluate whether the manager follows a repeatable and disciplined investment process, which we believe is a key indicator of whether success is likely to continue. Our partnerships have provided clients with the opportunity to invest alongside institutional clients such as pension funds and corporations.
Our team takes a proactive approach to evaluating this investment for each client when new opportunities arise. In the meantime, we’re always happy to discuss how private equity might fit within a broader, long-term strategy tailored to your goals.
Kirsten Halpin, CFA, CAIA, FRM
Director of Investments
Past performance is no guarantee of future results. The opinions expressed are those of Alaska Wealth Advisors, LLC. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed.
Alaska Wealth Advisors, LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Alaska Wealth Advisors’ investment advisory services can be found in its Form ADV Part 2 and/or Form CRS, both of which are available upon request.
