The Journal of Private Markets Investing

The Emperor Has No Cash Flows

Vishv Jeet — 2026-06-15

The Total Portfolio Approach (TPA) promises to deliver sustainably higher returns by treating
public and private assets on equal footing. Risk model vendors promote factor models as the
unifying framework that delivers this. Yet the mathematical elegance builds on a fundamental
misunderstanding of private market investing. Commercial factor models reduce private fund
commitments to collections of factor loadings such as market beta, size, value, and momentum.
This approach renders invisible the very characteristics that define these investments: their cash
flow dynamics, their illiquidity by design, and their operational requirements. This paper argues
that the dominant approach of applying factor models in TPA is not just incomplete but misleading,
offering asset owners a false sense of analytical precision while obscuring the real constraints
and opportunities in private market allocation. The alternative exists: sophisticated investors
already use cash flow models to answer the questions that actually matter: commitment pacing,
liquidity management, and allocation sizing.

Linking Operational Initiatives to Realized Financial Outcomes in Private Equity Transformations

Gregory Jones — 2026-06-15

Private equity-backed transformations operate under conditions that differ fundamentally from those faced by large corporates pursuing internally funded change programs. Ownership horizons are compressed, accountability for financial performance is immediate, and value creation must ultimately be validated through external diligence at exit.

Despite these constraints, many transformation efforts rely on parallel measurement systems that track initiative activity and modeled benefits outside the company’s statutory financial reporting framework. This disconnect often produces ambiguity regarding whether the operational improvements have been translated into durable economic outcomes. Such separation undermines management confidence, weakens governance, and exposes valuation risk during the sale processes.

This article proposes a practical framework for linking transformation initiatives directly to realized enterprise value reflected in the profit and loss statement, balance sheet, and cash flow of the enterprise. Rather than treating transformation tracking as a separate analytical discipline, the framework embeds initiative measurement within financial reality through explicit baselines, conservative attribution rules, and governance mechanisms designed to reconcile planned and realized outcomes. The framework complements standard private equity value-creation playbooks by providing a disciplined method for validating that initiatives translate into realized enterprise value.

The approach emphasizes speed of deployment, repeatability across heterogeneous portfolio companies, and evidentiary credibility under diligence conditions, while acknowledging the data limitations typical of newly acquired assets. The proposed framework is intended to reduce valuation leakage at exit by ensuring that operational improvements are demonstrable in audited financial statements rather than supported only by management projections.

The article argues that reliable transformation tracking constitutes a core operating capability for private equity sponsors rather than a project-specific tool. When architecture, measurement mechanics, data discipline, and governance cadence are aligned with statutory performance, transformation shifts from a narrative of projected savings to a demonstrable alteration of the company’s economic trajectory. Firms that institutionalize such frameworks can accelerate value realization during ownership, improve decision-making under uncertainty, and present more defensible earnings bridges at exit, thereby converting operational improvement into durable equity value.

Old Habits, New Assets: Rethinking Private Market CMAs

Melissa Hulme — 2026-06-15

Private market capital market assumptions (CMAs) often inherit public‑market habits: set total returns first, subtract fees separately, and infer risk metrics from historical de-smoothed data. This can produce implausible combinations of beta, correlation, volatility, leverage, and net returns. We propose a risk‑first, economically disciplined framework that combines (i) economic priors as guardrails on systematic risk with (ii) forward‑looking fundamental return models for value creation and financing, and (iii) an explicit, nonlinear fee module in which total fees are endogenous to expected performance. The approach is implemented as an iterative calibration that reconciles risk, gross returns, and fees into a coherent CMA set, improving coherence, transparency, and stress testing for private‑asset portfolio construction.

The Total Portfolio Approach

Aaron Filbeck — 2026-06-15

Strategic Asset Allocation (SAA) has served as the dominant framework for institutional portfolio construction for decades. Yet a growing number of the world's most sophisticated asset owners, from sovereign wealth funds to pension schemes across four continents, have moved beyond it, adopting what is now broadly referred to as the Total Portfolio Approach (TPA).

Drawing on two major research reports and in-depth conversations with investment leaders at Future Fund, CPP Investments, New Zealand Superannuation Fund, GIC, Railpen, TCorp, PSP Investments, USS, APG, CalPERS, and Alaska Permanent Fund, this article introduces TPA to readers who may be encountering it in depth for the first time. It covers what TPA is, how it differs from SAA across four critical dimensions, why interest in it has accelerated, what the journey toward adoption actually looks like in practice, and perhaps most importantly the conditions that make TPA a good or challenging framework to implement.

Managing Illiquidity in Open‑Ended Funds with Private Asset Allocations

Raul Leote de Carvalho — 2026-06-15

This paper explores the potential benefits and challenges of allocating to private assets in open‑ended funds. While private equity and private debt can enhance diversification and returns through an illiquidity premium, their long lock‑ups, capital calls and distributions, and valuation practices complicate their integration into liquid investment vehicles. We provide empirical evidence of an illiquidity premium for private equity and private debt using benchmark indices and discuss the impact of valuation lag and smoothing on portfolio risk and performance. We then present a dynamic recommitment strategy to illustrate how open‑ended funds can maintain stable target allocations to private assets and more effectively capture fund‑level internal rate of returns by avoid return dilution from cash drag, while relying on public equity and debt allocations to provide liquidity and manage cash flows. Using a stylized portfolio allocation, we conduct stress tests to analyze drift in portfolio weights during market crises and under significant investor redemptions. Finally, we address the launch of open‑ended funds by proposing ramp‑up strategies that accelerate convergence toward target private asset allocations while limiting the risk of overshooting. Overall, the paper provides a practical framework for constructing open‑ended portfolios with private assets, expanding access to this asset class for a broader investor base.

When Capital Is Not The Constraint: Political and Administrative Risks in Implementing QNDFs

Frank Fabozzi — 2026-06-15

This article examines the political and institutional risks that shape the viability of Qualified National Defense Funds (QNDFs), a proposed private-market mechanism for mobilizing capital toward defense-industrial and strategically critical sectors. While prior work established the financial and policy logic of QNDFs, this analysis focuses on the non-investment risks that determine whether such a regime can attract durable private capital. These risks include administrative ownership ambiguity, eligibility instability, political time-inconsistency, enforcement asymmetry, interagency fragmentation, and program capture. Drawing on established economic principles concerning credible commitment, institutional design, and governance under uncertainty, the article argues that private capital responds not only to incentives, but also to the perceived durability, predictability, and continuity of the policy framework itself. Where institutional safeguards are weak or discretionary authority is broad, rational investors often respond conservatively by delaying, reducing exposure, or declining participation. The central conclusion is that credible institutional design, not capital availability alone, is the binding constraint on policy-enabled private market vehicles.

Interview with Richard Ennis, cofounder of EnnisKnupp and former editor of "Financial Analysts Journal"

Michael Imerman — 2026-06-15

Featured interview between Editor-in-Chief, Michael B. Imerman, and Richard Ennis