Tom Sosnoff on Private Markets: High Fees, Illiquidity, and Retail Investor Risks

The Allure of Private Markets

• 🚀 The private markets are experiencing significant growth, with projections indicating a rise from $13 trillion in 2025 to $20 trillion by 2030.
• 💡 This expansion is often framed as a democratization of investment, offering retail investors access to opportunities previously unavailable to them.

Hidden Costs and Fees

• 💰 Investing in private markets is not cheap, involving substantial expenses beyond the initial investment.
• ⚠️ A common structure includes a 7% upfront fee and an additional 15-20% profit share upon sale, significantly impacting net returns.
• 🧩 Unlike publicly traded stocks with minimal fees, private investments often have hidden costs that erode potential gains.

Illiquidity and Control

• 🔒 Private market investments are typically illiquid, meaning they cannot be easily bought or sold.
• ⏳ Retail investors may face challenges with liquidity, as they are not accustomed to long lock-up periods, unlike institutional investors.
• 📉 Semi-liquid funds offer limited relief, as they can become virtually illiquid during market downturns.
• 🚫 The sale of private investments is often controlled by external funds or advisories, limiting the investor's control over exit timing.

Market Conditions and Caution

• 📈 The current 15-year bull market may be creating a false sense of security, making private market investments appear more successful than they are.
• ⚠️ Sosnoff urges caution, advising investors to be careful when hearing broad statements about the private markets exploding with retail investment.
• 🎯 While access for retail investors is seen as a positive, the inherent risks and costs of private markets require careful consideration.