Private Market Alternatives for eligible investors​

Private alternative investments (a.k.a. alternatives in private markets, private assets, private funds, private placements, or private alternatives) are nonpublic alternative investments offered privately to a limited number of qualified investors. Private alternatives are offered across several asset classes, such as private equity, private credit, and real assets. Typically, each asset class may help you pursue one or more strategic objectives, such as capital appreciation, diversification, income generation, or risk management. Here are some key considerations when exploring private market alternatives:

• Unique investments. Because these types of alternative investments often invest in private markets or pursue unique investment opportunities, there may be increased risk for certain strategies, although investors taking on that risk may be compensated by higher reward potential.
• Liquidity limitations. Some private market alternative investments are less liquid than traditional investments, which means investors may have no access to the money they've invested, or any potential profits, often for a period of many years. This is often referred to as a “lock-up period." In cases like tender offer funds or intermittent liquidity funds, there may be limited windows during which investors can purchase or redeem shares.
• Illiquidity premium. In exchange for tying up capital for longer periods of time, illiquid alternatives typically offer the potential for higher returns, which is often referred to as the "illiquidity premium."
• Performance monitoring. It can be more difficult to evaluate the performance of private market alternatives vs. traditional investments, as the assets held by the funds are valued far less frequently and may have limited or no past performance data. Also, as private investments, they don’t have the same financial disclosure requirements as liquid alternatives.

There are many ways in which alternative investments may differ from traditional investments:

• Eligibility: Liquid alternatives are generally available to most investors. However, private market alternatives require investors to have a certain level of income, net worth, or hold specific financial licensures to be eligible to invest.
• Complexity: Because alternative investments can have more complex structures when compared with traditional investments, it can be more challenging for investors to evaluate the details of an alternative investment opportunity.
• Liquidity: Different alternative investments offer varying levels of liquidity, which refers to how easily an investment can be sold. Many alternative investments can be subject to a "lock-up period" of a number of years, during which time the investment cannot be sold. Certain funds have "intermittent liquidity," which means that they may be able to be redeemed during tender windows or repurchase periods. Liquid alternatives, however, can generally be bought and sold at the investor’s discretion.
• Regulations: Alternatives may be subject to unique regulatory requirements, and, although they're regulated by the Securities and Exchange Commission (SEC), they can be exempt from registration with the SEC. This is one reason alternatives have historically only been available to more sophisticated qualified institutional investors.
• Risk: Alternative investments often present different types of risk than those of traditional investments. Many of these risks can be tied to specific characteristics of alternatives and their specific investment strategy. However, this additional risk may be accompanied by higher return potential.
• Fees: Some alternatives may have fee structures that differ from traditional investments, so it may be more difficult to determine exactly what your expenses may be. In many cases, the fees and expenses may be higher than those associated with more traditional investments.
• Funding: Alternatives can be subject to more complex funding processes, such as subscriptions and capital calls, which can complicate portfolio construction, rebalancing, and risk management.
• Tax reporting: Many alternatives have a standard Form 1099 tax-reporting obligation; however some alternatives may have a different or more complex tax-filing process. This in turn can delay or complicate tax filing, particularly because tax forms related to these investments, such as Schedule K-1s, tend to arrive later than the 1099s investors usually receive from traditional investments. This may require the taxpayer to apply for a tax-filing extension.
• Minimum investments: Private alternatives generally have higher minimum investments when compared to semi-liquid/liquid alternatives and traditional investments, which typically have no or lower minimum investment requirements.

Liquidity refers to how easily an investment can be sold. Alternative investments are offered in a range of liquidity levels, in which the ability to sell or redeem an investment can be limited. The liquidity of an investment can be considered across two dimensions—the liquidity of the fund (i.e., ability to sell) and the liquidity of the underlying assets within the fund. It is important for you to understand a fund’s liquidity terms and risks before investing.

• Liquid alternatives
  Liquid alternatives usually invest in securities that primarily trade in public markets. Structured as ETFs and mutual funds, they are valued on a daily basis and can be sold at your discretion based on the current NAV or market price.
• Intermittent liquidity alternatives
  These types of funds may offer share repurchase programs that allow you to redeem a portion of your investment, often known as "tender windows" or "repurchase periods." The key differentiator of intermittently liquid funds is that investors typically can only sell their shares back to the fund periodically, on a specified redemption schedule and only at specified intervals. However, in exchange for limited liquidity, these funds may offer the potential for higher returns. This is referred to as an "illiquidity premium."
• Illiquid alternatives
  These funds invest in assets through private market transactions. Illiquid funds may also be subject to a "lock-up period," during which time the investment cannot be sold, often for a period of many years. However, in exchange for tying up capital for longer periods of time, illiquid alternatives typically offer the potential for higher returns. This is referred to as an "illiquidity premium."

Liquidity is important as you consider your overall portfolio and planning, including any potential liquidity needs during the time your investment may be locked up, your household financial situation, your emergency funds, your investment time horizon, and your comfort with risk. Before investing in a fund, please review the risk disclosures and liquidity terms, which are described in each fund’s prospectus or other offering documents.

When investing in private market alternatives, investors are typically required to meet the eligibility criteria for an Accredited Investor or Qualified Purchaser. This standard may vary from fund to fund, and investors must attest in writing that they meet at least one of the definitions in order to be eligible to invest in the fund (along with other suitability requirements). Keep in mind that Fidelity may not have alternative investments available for your specific eligibility level at any given time, so these guidelines are noted for alternatives in general.

Accredited Investor

• An individual with $1,000,000 or more in net worth, not including the value of their primary residence (either as an individual or jointly with a spouse or spousal equivalent)
• An individual with $200,000 or more in income or have joint income of $300,000 or more with your spouse or spousal equivalent in each of the two most recent calendar years (and a reasonable expectation of the same income level in the current year)
• A trust with $5,000,000 or more in total assets and whose purchase is direct by a person with knowledge and experience to be capable of evaluating the merits and risks of investing in the Fund
• A revocable trust with an Accredited Investor as the grantor

Qualified Purchaser

• An individual who alone or with that person's spousal equivalent owns at least $5,000,000 in investments
• An individual or entity that owns or invests $25,000,000 or more
• A revocable trust with a grantor that has $5,000,000 or more in investments
• A corporation, limited liability company, or partnership whose securities are beneficially owned exclusively by Qualified Purchasers
• An entity that owns $5,000,000 or more in net investments and that is owned directly or indirectly by or for two or more natural persons who are related as siblings or spouses (including former spouses) or direct lineal descendants by birth or adoption
• Any trust not covered by the foregoing definitions and that was not formed for the specific purpose of acquiring the securities offered as to which the trustee (or other person authorized to make decisions with respect to the trust), and each settlor or other person who has contributed assets to the trust, is a Qualified Purchaser

Public markets are shrinking, with the number of publicly traded companies declining by more than 40% over a 25 year period.* This has resulted in investors chasing a shrinking number of investment opportunities across traditional asset classes. In addition, private companies are playing an increasingly important role in today's economy, representing significant growth potential. Dedicating some portion of a portfolio to alternatives could help you take advantage of this growth potential.

Alternative investments can provide access to strategies that traditional asset classes, such as stocks and bonds, or traditional "buy-and-hold" strategies, cannot, making them more appealing to sophisticated investors. Alternatives typically have a low correlation to traditional assets, meaning that they tend to respond differently to various market conditions, which can improve a portfolio's diversification and help with risk management. For example, some strategies, such as middle market direct lending or real assets, may be better able to weather economic conditions, such as inflation, than traditional assets. In addition, although some alternative investments may sometimes come with higher risk than traditional investments , they may also offer higher return potential.