This paper is the final piece in a three-part series on the Total Portfolio Approach (TPA). It explores mapping factor exposures of private assets to total portfolio desired factor exposures. We look at some of the challenges in mapping private equities to an Equity factor and implications for those with significant weights or managing desired exposures with listed assets. We will utilise privateMetrics and infraMetrics alongside listed asset indices to quantify economic risk exposure. This can then be used to understand the role and behaviour of private assets within a multi-asset portfolio.

TPA with Private Assets

A Total Portfolio Approach requires private assets to be incorporated within a unified risk framework alongside listed assets. Using privateMetrics® and infraMetrics® indices enables this integration by providing asset level indices with market-based pricing, monthly data, and realistic risk and return estimates. This allows private assets to be analysed robustly across different macroeconomic environments, overcoming the limitations of both infrequent and smoothed valuation data, which is endemic to the industry.

Interest Rate Regime Change

We examine the performance of private and listed assets across two distinct periods: 2014–2021 and 2022–2025. The earlier period was characterised by low and declining real interest rates, which ultimately turned negative in 2021–2022. During this environment, private equities significantly outperformed both listed equities and infrastructure equities, behaving like a high-beta exposure to the “equity factor”, or listed global equities. In contrast, since 2022, private equities have materially underperformed listed equities.

Measuring Equity Exposure with privateMetrics® and infraMetrics®

Because private equities’ covariance with listed equities is time varying, actual portfolio exposure may differ materially from allocation weights. This creates challenges for institutions targeting specific risk exposure levels, as portfolios can unintentionally become over- or underexposed to growth. With privateMetrics and infraMetrics, these relationships can be measured allowing for adjustments to listed assets to maintain desired total portfolio exposures

Private Equity and Interest Rates

Private assets are particularly affected by rising interest rates through multiple channels, including higher debt servicing costs, valuation compression, reduced exit activity, and shifting asset allocation preferences. These dynamics may differentiate them from listed equities and partially explain their recent relative underperformance. This reinforces the need for asset level private equities and infrastructure equities indices that capture the dynamics in their respective markets.