Private market investments have emerged as one of the most dynamic drivers of long-term growth in institutional portfolios. For trustees responsible for stewarding members’ retirement savings, private markets offer access to diversified, often resilient assets that deliver both long-term financial performance and visible socio-economic impact.
Once viewed as a niche opportunity, investing in private markets or alternative assets has become central to institutional investment strategies. Globally, 92% of investment advisers now include alternative assets in their portfolios, with the majority planning to increase allocations in the coming years according to the 2025 CAIS-Mercer Report on the State of Alternative Investments in Wealth Management.
In South Africa, this growing momentum aligns with the national imperative to channel capital into productive assets that foster sustainable growth. According to our most recent survey of over 190 trustees at the 2025 Batesta Retirement Conference and the Institute of Retirement Funds Africa (IRFA) Conference, 69% of trustees plan to increase their exposure to alternative assets in the next 2 years.
With 31.1% seeking exposure to infrastructure assets and 20% for private equity. For many trustees, getting into the asset class can come with some questions; that’s why we need to get back to the fundamentals of the asset class.
What are alternative investments and how do they work?
Private markets include all investments not traded on public exchanges like the JSE. These assets are typically accessed through long-term, actively managed investment vehicles.
They span a wide range of strategies and asset classes, including: private equity, private debt, infrastructure, real estate, venture capital and hedge funds amongst others. They also make a real-world impact by building assets that affect the real economy such as roads, data centres, housing, schools etc.
Because these investments are unlisted, they tend to offer lower short-term price volatility, deeper diversification and pathways to influence operational performance, governance, and impact.
What are the characteristics of private markets?’
In South Africa, Regulation 28 allows retirement funds to allocate up to 15% for alternative investments under defined limits, providing trustees with the flexibility to diversify meaningfully while maintaining compliance. Trustees can allocate up to 45% for infrastructure, 15% for private equity and up to 10% for hedge funds.
We calculate that the global private assets market is more than 850% larger than listed markets, offering access to broader and more diverse growth opportunities.
However, these assets also come with unique complexities such as longer investment horizons, operational demands, due diligence requirements and liquidity constraints.
These factors make governance and fund manager selection essential and underscore the need for trustees to understand private market structures and key participants to evaluate opportunities and strengthen oversight.
At the core of each fund is the General Partner (GP), the manager responsible for sourcing and evaluating investments, overseeing portfolio performance and executing exits. Investors such as pension funds participate as Limited Partners (LPs), committing capital to funds but not engaging in day-to-day investment activity.
The underlying assets, be it companies, real estate, renewable energy facilities or infrastructure projects, make up the fund’s portfolio. Finally, you have Investment Committees (IC), these are teams within the GP that robustly evaluate, assess and approve investments and exits.
How does the private market fund lifecycle work?
Most private market funds follow a structured lifecycle, typically spanning 5 to 12 years. This lifecycle begins with fund formation, during which the GP establishes the fund’s legal and operational architecture, investment strategy and governance framework.
This is followed by capital raising, where institutional investors commit capital that determines the scale of the fund. Once commitments are secured, the investment period begins. During this stage, the GP deploys capital into assets aligned to the fund’s mandate, whether infrastructure projects, real estate developments, private companies or lending opportunities and actively manages them to enhance performance and value.
As investments mature, the fund enters the divestment phase, where assets are sold, refinanced or otherwise realised to generate returns.
The final stage, liquidation, involves distributing capital and profits to investors and formally winding down the fund.
What are exit options in private markets?
An exit strategy outlines how an investment will be converted into cash and is a critical component of private market investing.
A fund may sell an investment to an operating company, in what is known as a strategic acquisition. In other cases, the asset may be taken public through an Initial Public Offering (IPO), allowing the market to determine its value. Another common route is a secondary sale, where the asset is sold to another private market fund seeking exposure to the sector or business.
A fund may also choose recapitalisation, refinancing the asset to release capital while retaining some ownership. In certain circumstances, a management buyout (MBO) may be appropriate, allowing the company’s leadership team to acquire the business.
In less favourable conditions, liquidation may occur, although this is typically a last resort.
Why should this matter to trustees?
Alternatives provide returns that are not closely correlated with public markets. This means that when listed equities experience volatility, private market investments often behave differently, helping to stabilise overall portfolio performance.
Many private market investments are linked to tangible, long-term assets such as infrastructure, renewable energy and property. These real assets tend to rise in value alongside inflation, offering a natural hedge and protecting the purchasing power of investment capital.
Private equity does more than generate financial returns. It builds companies, creates jobs and supports South Africa’s broader development agenda. Investments in renewable energy, affordable housing, digital infrastructure and healthcare contribute directly to the country’s long-term economic growth.
With the investment landscape evolving, trustees who embrace private equity with discipline, insight and purpose will be best positioned to deliver enduring value for their funds, their members and the country.
