Private real assets have become an increasingly prominent component of wealth portfolios. With that prominence has come greater reliance on benchmarks to explain performance, validate allocation decisions, and manage client expectations. For advisers, benchmarks bring structure and confidence. For clients, they offer reassurance.
Unfortunately, in private markets, that reassurance is often misplaced. Most private real estate and infrastructure benchmarks are appraisal-based. They move slowly. They smooth volatility. They rarely reflect actionable exit values. As a result, they tend to understate both risk and uncertainty — precisely the dimensions that matter most to private wealth investors.
Clients do not experience risk as standard deviation. They experience it as illiquidity
