Introduction: The Investments You Can’t Exit With One Click
Public markets are easy.
You buy.
t=”401″ data-end=”404″ />>You track.
=”yoast-text-mark” data-start=”414″ data-end=”417″ />>You sell—sometimes too fast.
Private markets are different.
Once you enter, there’s no daily price ticker, no instant exit button, and no comforting liquidity. That’s exactly why they attract serious money. In recent years, more Indian High Net-Worth Individuals (HNIs) have started looking beyond listed equities—towards private markets and unlisted shares to diversify their portfolios.
Industry reports from Bain & Company India and BCG highlight this steady shift among Indian HNIs toward private equity and private credit as portfolios mature
👉 https://www.bain.com/insights/india-private-equity-report
👉 https://www.bcg.com/india/private-equity
Not because they’re bored.
But because scale, access, and patience unlock a different kind of return.
Still, this is not an asset class for everyone.
Before allocating serious capital, it’s critical to understand both the rewards of private market investments and the risks that quietly come with them.
Why Indian HNIs Are Looking at Private Markets
Over the last decade, wealth in India has grown faster than traditional public-market opportunities. Many HNIs already have:
-
Significant exposure to listed equities
-
Real estate allocations
-
Debt and structured products
Private markets offer something different: asymmetric outcomes.
According to McKinsey’s Global Private Markets Review, private assets have consistently grown faster than public markets globally, driven by long-term capital and patient investors
👉 https://www.mckinsey.com/industries/private-capital/our-insights
You accept complexity and illiquidity in exchange for upside that public markets can’t always offer.
The Rewards of Private Market Investments
Let’s start with what draws HNIs in—because the rewards are real.
Potential for High Returns
The most obvious attraction is the potential for high returns.
Unlisted companies are earlier in their growth journey. If you back the right business before it scales, the upside can meaningfully exceed public market returns.
Many of India’s marquee listed companies created disproportionate wealth before listing—a fact often highlighted in NSE India and IPO research studies
👉 https://www.nseindia.com/companies-listing/ipo
That early phase is where private market investors participate.
Portfolio Diversification Beyond Public Markets
Private investments behave differently from listed stocks.
That’s why portfolio diversification is one of the strongest reasons HNIs allocate here.
Private market returns are driven more by:
-
Business execution
-
Market expansion
-
Strategic exits
and less by daily sentiment, news cycles, or FII flows.
Research from BlackRock and MSCI consistently shows lower correlation between private and public assets over long periods
👉 https://www.blackrock.com/institutions/en/insights
👉 https://www.msci.com/private-assets
For investors already heavy in public equities, unlisted shares can reduce correlation risk.
Early Access to Innovation
Private markets are where innovation is born.
From fintech and healthtech to manufacturing platforms and deep-tech, this is where capital meets ideas before they become mainstream.
This early access to innovation allows HNIs to participate in sectors that may not even exist in public markets yet—well before valuation multiples expand.
It’s not about trends.
It’s about structural change.
Lower Volatility (On Paper)
Private investments don’t get repriced every second.
That creates the perception of lower volatility.
While business risk remains, investors aren’t exposed to daily price swings that often trigger poor decisions in public markets.
Behavioural finance studies referenced by Morningstar show that reduced price visibility can actually improve investor outcomes
👉 https://www.morningstar.com/investing-classroom
Potential Influence and Strategic Access
Unlike public markets, private investments often come with:
-
Board access
-
Information rights
-
Strategic discussions with founders
This potential influence doesn’t mean control—but it does mean visibility and alignment that public shareholders rarely enjoy.
For seasoned HNIs, this engagement is part of the return equation.
The Risks and Considerations (Where Most Mistakes Happen)
Now for the uncomfortable part.
Private markets reward patience—but punish ignorance.
Illiquidity: The Exit Is Never Guaranteed
Illiquidity is the single biggest risk.
There is no guaranteed exit timeline for unlisted shares. Capital can remain locked for years—sometimes far longer than expected.
SEBI has repeatedly cautioned investors about liquidity risks in unlisted and alternative investments
👉 https://www.sebi.gov.in/investor-awareness
If you need liquidity, private markets are the wrong place to look.
This asset class demands surplus capital—money you genuinely don’t need in the near or medium term.
Valuation Uncertainty
In public markets, prices are visible.
In private markets, valuations are negotiated.
That introduces valuation uncertainty. What you pay today may not reflect exit value tomorrow—or ever.
As KPMG India notes in its private equity reports, paper valuations often diverge meaningfully from realised returns
👉 https://home.kpmg/in/en/home/insights.html
Limited Transparency
Private companies aren’t required to disclose information the way listed firms do.
That means:
-
Fewer disclosures
-
Limited third-party scrutiny
-
Heavy reliance on due diligence
Limited transparency increases dependence on advisors, legal frameworks, and deal structure.
This is not a DIY playground.
Higher Risk of Failure
Let’s be blunt.
A meaningful percentage of private companies fail.
The higher risk of failure is the price you pay for upside. Some investments may:
-
Stall
-
Dilute heavily
-
Shut down entirely
This is why diversification and position sizing matter more here than anywhere else.
Regulatory & Fraud Risk
Private markets operate with fewer safeguards.
That increases regulatory & fraud risk, especially in informal secondary markets.
HNIs must ensure:
-
Clean ownership history
-
Regulatory compliance
-
Proper legal documentation
SEBI and RBI advisories regularly warn against poorly structured private deals
👉 https://www.rbi.org.in
Cutting corners here is expensive.
Who Should Actually Invest in Private Markets?
Private investing is not about net worth alone.
It suits HNIs who have:
-
Long-term horizons (7–10+ years)
-
High risk tolerance
-
Well-diversified public portfolios
-
Access to strong legal and financial advice
If daily liquidity gives you comfort, this asset class will test you.
Smart Allocation: How Much Is Too Much?
A common mistake is overexposure.
For most Indian HNIs, private market exposure typically works best at:
-
10–25% of total investable wealth, depending on risk profile
This allows participation in upside without threatening financial security.
Practical Action Steps for HNIs
If you’re considering investing in private equity and unlisted shares, start here:
-
Use established platforms or trusted intermediaries
-
Demand full legal and financial due diligence
-
Diversify across vintages, sectors, and deal sizes
-
Assume zero liquidity upfront
-
Review allocation—not individual deals—annually
Patience is not optional. It’s structural.
Common Mistakes to Avoid
Even experienced investors slip up by:
- Chasing brand names instead of fundamentalsOverallocating to single deals
-
Ignoring exit mechanics
-
Treating paper valuations as realised wealth
Private markets reward discipline—not excitement.
Conclusion: Private Markets Aren’t Faster. They’re Deeper.
Investing in private markets and unlisted shares isn’t about shortcuts.
It’s about accepting:
-
Slower liquidity
-
Higher uncertainty
-
Deeper involvement
in exchange for potential for high returns, meaningful portfolio diversification, and early participation in long-term value creation.
For Indian HNIs with patience, perspective, and proper advice, private markets can play a powerful supporting role.
Just don’t confuse access with suitability.
