We recently gained access to this asset class through a mutual fund. In the past, only large institutional or wealthy investors could gain access to investments in non-public companies. Besides that, there were many other disadvantages to investing in private equity, including the potential for capital calls where the fund managers require that investors provide more capital if needed, high costs including a fee structure like hedge funds (2% management fee and 20% of the gain goes to the manager, typically called 2 and 20) and lock-up periods that prevent access to your investment for potentially several years. Using mutual funds eliminates most of those issues.
Most individual investors’ portfolios include only two asset classes: public domestic equities and bonds, the “risky” and “safe” asset classes, respectively. This traditional portfolio (colloquially referred to as the “60 / 40” reflecting a typical allocation to equities and bonds) did not perform well from 2000 – 2010 but did well over the most recent ten years from 2011 – 2021.