Let’s talk about the pricing of assets. People want to know how much their “stuff” is worth — especially when it comes to investments.

Many of us are used to having publicly traded securities, including stocks and bonds, priced daily by markets.

Oil, gold and other commodities, REITS and even crypto prices are set by global markets.

Of course, real estate and other illiquid assets are not priced that way, with values only estimated until an actual sale takes place.

But you might be surprised to learn private market assets — including private equity, private credit and hedge funds — are like real estate and other illiquid assets with only estimated values.

The pitch for private market assets is that illiquidity can actually benefit investors. It allows managers to hold assets longer without worrying about selling at inopportune times, and it can generate higher returns than publicly traded securities.

Many private market funds have a five-, seven- or even 10-year holding period, after which the plan is to sell the underlying holdings.

Some of this actually makes sense, as long as you truly don’t need the money back for the long holding period.

Private markets have been widely used as a part of portfolios by big institutional investors (pension funds, endowments, universities) for a couple of decades.

High net worth individuals and family offices (“accredited investors”) have also had access to private market products.

Institutional investors have historically looked for excess returns on private equity of 3% over publicly traded stocks. And like with most investments, results have been mixed, with some notable big wins and some not-so-great results.

But with its never-ending appetite for sales, Wall Street is now trying to pitch private market products to retail investors.

And the more than $12 trillion in defined contribution retirement plans — think 401(k)s, etc. — plus another $16 trillion in IRAs, private product promoters see a massive new sales opportunity.

The recent pitch has been to “democratize” markets and give the little guy the same access to private market products the big guys have had. Sounds fair, right?

Well, many professionals who serve clients as fiduciaries don’t agree. These folks provide advice on a fee-only basis — and don’t have the potential conflicts-of-interest that come with selling products.

There are several real concerns about offering private market products to retail investors.

Lack of Liquidity

It can be easy to say you’re OK with tying up your money for five, seven or 10 years when you make an investment, but life has an amazing way of throwing surprises.

What if you really needed your money but were told you couldn’t get to it for several more years?

Lack of Transparency

Many of these private market products are complicated, making it difficult for even experienced investors to fully understand what they’re buying.

How many of you have actually read the prospectus for the mutual funds you own, let alone private offering documents for private funds?

High Fees

Fees on mutual funds and exchange-traded funds have been falling for years, and many publicly traded products have fees of just a small fraction of 1%. Wall Street and fund managers have found they can charge much higher fees for private market products, often 1%-2% PLUS a percentage of profits. No wonder they’re eyeing IRAs and 401(k)s.

Size Matters

Most of the best private market products carry extremely high investment minimums — often $25 million for top-tier funds.

These products have strict eligibility requirements, available only to “qualified” and “accredited” investors. For many, you can only get access through institutional bankers and consultants.

Fiduciaries (and you) should worry about what kinds of offerings you’ll have available in small amounts  I’m reminded of Groucho Marx’s joke, “I don’t want to belong to any club that would accept me as a member.”

One need only imagine the products available small amounts.

These are all legitimate concerns, but to me there is perhaps the bigger issue of pricing.  Since they are not traded daily (or even for several years), private market product valuations are not set by an efficient market.

There are several core “valuation methods” including the use of comparables (like in real estate), using recent transactions (new investor purchases), discounted cash flows, or asset-based valuations (for funds with substantial tangible assets).

Values may — and likely should — include an “illiquidity discount.” But at the end of the day, the fund manager sets the value, and its true value will only be determined if/when underlying assets are actually sold.

Maybe Yogi Berra will be right, that a nickel really isn’t worth a dime anymore.

I recently attended a meeting with managers of a foundation that handles funds for a nonprofit organization on whose board I serve.

The foundation works with an advisory firm that consults with more than 250 institutional clients holding $2 trillion in total.

Managing this kind of money gives clients access to top-tier private market products, and advice to go with them.

I was very impressed with these professionals and was not surprised at their response to my question about the “democratization” of private market products.

They quickly responded with expectations of lawsuits against 401(k) plan sponsors and advisers who as fiduciaries are required to look out for the best interests of clients, noting the same concerns I’ve presented in this column.

So, I leave you with the words “Caveat Emptor,” that’s “buyer beware” for those of us who didn’t study Latin.