The other risk is valuation, says Reichart. Because these companies aren't listed, they don't have to follow the same disclosure practices as public operations do, which can make these companies hard to value.
It's up to companies to place their own value on a business — that's done by a valuation committee, not the managers themselves — which is typically based on funding rounds, public company comparisons and a firm's own internal metrics.
"A company is valued at any point in time, and that can be a challenge because there're no standard," says Reichart. "Different asset managers can do different valuations at any point."
However, Boyd adds that because of its private status, he can ask a CEO anything he wants, such as information on detailed monthly user data, which isn't typically disclosed after a company goes public. "I can get whatever I want," says Boyd. "Stuff I'll never get from a public company."
Still, you don't know what a company is worth until it goes public, and there could be better entry points after an IPO. For instance, Fidelity bought into Facebook at about $25 in March 2011. It IPOed in May 2012 at $38 but fell to $18 in August of that year. While it could have made more by waiting, with Facebook now at $150 a share, it still made a mint off the company.
Even with the risks, Stammers says private businesses can help boost returns, as long as managers keep their positions relatively low. "These can juice returns, and these are opportunities that you can't get anywhere else," he says. "It risky, but then again, most aren't making huge bets on these companies."
As for Boyd, private companies are now just part of his investible universe. "This kind of investing is here to stay," he says.
— By Bryan Borzykowski, special to CNBC.com