The future of private markets: public versus private equity 

Headlines in recent times have been focused primarily on the unprecedented AI CapEx cycle, on-again/off-again tariffs and geopolitical conflict. However, this is only half the story of what is going on in financial markets. Under the surface, the familiar asset class architecture has shifted with ramifications for how capital flows and risk is distributed that extend beyond any single asset class or investor type.

While the goal of entrepreneurs of yesteryear may have been an IPO, a more burdensome regulatory environment and investors’ embrace of private equity has resulted in a new equilibrium. Over the past two decades, public markets have narrowed, exemplified in the US by a 35% decline in publicly listed firms, from 7,000 to 4,500. On the other hand, private-equity-backed companies have increased 400%, from 2,000 to over 11,500.¹ It goes beyond just the sheer number of companies, assets under management in private markets now exceed $15 trillion globally.² This deepening of private capital pools, especially in private equity and private credit, and the growing acceptance of vehicles such as continuation funds has allowed founders and private equity firms to hold their assets privately for longer.

Illustrating this trend has been the growth of the VC unicorn universe compared to listed Small Cap. Market cap for VC unicorns now sits at nearly $8 trillion, more than twice that of US Small Cap.³ It isn’t just the number of VC unicorns; the largest now have valuations that, when they eventually IPO, will place them squarely in the large-cap index. This aligns with recent work on the shift of where value creation occurs in a company’s life cycle, where in the past 88% of a company’s value creation occurred in public markets, the figure has now shrunk to closer to 45% for IPOs in the last 5 years.⁴

While private markets have been broadening and deepening, gains in public markets have increasingly been concentrated in a few mega-cap, technology stocks — the “Magnificent Seven” — which now make up a large share of key indices. This concentration has boosted returns as AI has gained steam, but it also risks increasing volatility as hyperscalers commit ever-greater amounts of CapEx in their pursuit of AI supremacy. Indeed, in 2025, while the top 10 stocks by market capitalization in the S&P 500 accounted for a sizable 40% of the index, they represented an even larger share of ex post risk: 53%.⁵

In building a diversified equity portfolio that captures the full market opportunity set and full life cycle of a company, investors need to pair their public equity allocation with a thoughtful allocation to private equity.

At the same time, when building a total-equity portfolio, intentionality regarding underlying exposures is important. As illustrated by the SaaS meltdown in 1Q 2026, it is critical to view portfolios through a holistic, total-portfolio lens rather than by asset class. Software risk permeated public equity, public credit, private equity and private credit in a way not picked up by looking at historical correlations between asset classes. The build out of AI infrastructure is bringing the same type of asset-class blurring risk into historically diversifying real-asset categories as well.

The uptick in buyout investments in SaaS companies highlights the importance of building vintage and sector diversification into a private equity program. A new program limited to primary funds that followed the market into SaaS would lack some of sector diversification of a more mature program. If alternatively, that program had blended primary funds with secondary funds, the sector mix could have ended up more diversified. Similarly, utilizing co-investments as part of a program, on top of providing fee savings, can help reduce blind pool risk. This allows investors to be more intentional in the risks they are taking be it leaning into AI or away from legacy SaaS, or avoiding tech altogether. The combination of secondaries and co-investments allows investors greater control over their private equity program and a stronger ability to consider where they are taking risks across the combined equity portfolio and with it the total portfolio.

As public and private markets grow more interconnected, investors should move beyond simple allocation decisions and seek to understand where growth and risk are concentrated. We believe resilience requires a total portfolio approach that views exposures holistically and adapts to ongoing structural change rather than isolated cycles.