Private markets: Understanding the past and looking to the future

Table of contents:

• The growth of private market funds
• The rise of private companies
• Aiming for higher returns and income
• Growth into the future

The growth of private market funds

Private markets, as a collection of asset classes, are relatively new opportunities for investors. In the early 1980s, there were just a handful of private market funds to invest in. 

Fast forward to today and there are hundreds of professionally managed funds along with other investment vehicles ranging from ETFs to digital platforms. 

But what’s driving this growth in the number of private market funds? 

The rise of private companies

For decades, most people and institutions invested in mainly publicly traded stocks and bonds. But today, there are now far fewer public companies and more private ones.

Many reasons can be attributed to this shift, including:

• Ample private capital which allows companies to stay private longer
• Avoiding stringent regulations and high costs of going public
• M&A consolidation which reduces public companies
• Founders preferring control/less pressure

This increase in private companies has created a vast new landscape of investing opportunities.

Aiming for higher returns and income

With persistent low interest rates during the post-2008 era, bonds and cash yielded less for years. Lower yields on cash, along with less opportunity to diversify in public equities, drove investors to seek higher returns and income in private equity, private credit, and real assets.

Growth into the future

The growth in private sector companies and demand from investors for diversified sources of returns positions private markets to continue its growth spurt into the future. In fact, private markets are estimated to add another $10 billion in AUM by 2030.

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