Our bird’s eye view
on private markets
As long-term investors, we look beyond short-term fluctuations to examine broader industry shifts, ensuring that we make informed decisions to help our investors stay ahead.
Private Capital AUM
Source: Preqin as of September 1, 2022. Private Equity includes Venture Capital companies.
Private markets have grown meaningfully and continue to expand
The modern-day private equity industry has come a long way since its humble beginnings in the 1960s. What began as just a handful of firms has now ballooned into a massive industry with more than $12 trillion in assets under management (AUM). Investors have been increasingly interested in private market strategies due to the general outperformance of public markets. And with that continued demand, we have seen private capital AUM triple over the past ten years. What was once an “alternative” investment option is now increasingly viewed as a necessary component of a well-balanced portfolio.
As investors continue their pursuit for higher yields, lower volatility, and less correlated returns, private capital AUM will likely continue to expand. Moreover, innovative fund structures are emerging, making it easier than ever before for retail investors to participate in private market strategies. What was previously an untapped pool of capital from individual investors may well compound the industry’s growth. These advancements will likely shape the future of the industry, potentially leading to more opportunities for investors to participate in private markets.
2023 Market Outlook video
Private markets, accessed through alternative investments, proved to be resilient and outperformed their public market counterparts in 2022. We believe they have the opportunity to do so again in 2023, as ongoing market volatility will present compelling opportunities for scaled managers with differentiated capabilities and deep expertise.
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The Private Economy Grows in Importance
Number of US-listed companies vs. US private equity-owned companies
Source: PitchBook and World Federation of Exchanges. Data as of December 2022, the most current available.
The private economy continues to grow
Although the shift from public to private markets was already underway in the early 2000s, the trend was accelerated by the 2007-2008 Global Financial Crisis (GFC). Due to capital restrictions and regulatory challenges, the banking system came under pressure—leading to a movement away from traditional financing from large banks. The resulting gap for companies seeking capital was filled by private market firms, creating new options for management teams that would have previously looked to the public markets for their financing needs. While the world has since recovered from the GFC, the benefits offered by private capital firms has resulted in their continued growth and rise in prominence over the long term. In lieu of an IPO or debt offering, company management teams now have an opportunity to remain private for longer. The result has been a notable surge in the number of privately-held enterprises. At the close of 2022, the number of US private equity-backed companies was more than double publicly-traded ones.
With the dwindling number of publicly traded companies and the rise of private equity-backed enterprises, the private market is undergoing a steady and substantial expansion. Investors are keen on tapping into this burgeoning market; and as they pour more capital into private market strategies, companies will be presented with even more opportunities to leverage private capital—thus reinforcing the growth of the private economy.