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'Rumors of my demise have been greatly exaggerated’: The future of private markets 

Investing in the age of megatrends: a total portfolio approach.

In today’s investment environment, risks may come from anywhere, and some of the biggest risks, such as Artificial Intelligence (AI), seem to be everywhere. 

In our Large Asset Owner Barometer, investors told us they believed that geopolitics and regulatory change represented the greatest risks to their portfolios over the next three years. These concerns have certainly been validated in 2025, reiterating the importance of diversification as a key tool in seeking greater long-term portfolio resilience. 

However, what constitutes diversification is becoming more of an open question among investors, particularly whether top-down diversification remains relevant in the age of megatrends.

In 'Rumors of my demise have been greatly exaggerated’: The future of private markets, we argue that a more holistic, total portfolio approach is required to successfully navigate today’s thematically driven markets. The development and acceleration of certain megatrends mean that all sectors and geographies are exposed to many of the same disruptive forces. We believe the influence of AI, and decentralization will reverberate across every industry globally, creating both generational investment opportunities and profound market risks.

We examine how these trends are reshaping risks and opportunities, supported by key data signals.

More companies are staying private for longer, and public equities are increasingly dominated by the Magnificent Seven[1]. While more than US$1 trillion of hyperscaler capex is expected in 2026 and 2027, more than many well-developed countries’ GDP[2].

The AI boom is fueling growth in infrastructure and real estate but may lead to doubling up of risk. By 2028, estimates suggest AI alone could consume as much electricity annually as 22% of all US households[3].

In our view, the decade of financial repression is largely behind us. The increase in SOFR from 0% in 2020 to nearly 4% in 2025 is creating both opportunities and risks for investors, as credit allocations increasingly mix public and private credit[4].
Collaborating with clients to enable the achievement of their investment goals, Mercer has been a trusted partner for over 80 years. As portfolios increasingly evolve to encompass public and private assets, a total portfolio approach, which is core to our DNA, will be crucial.
Niall O’Sullivan

Global Solutions, Chief Investment Officer

The future of private markets

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[1] The "Magnificent Seven" refers to a group of seven leading technology companies that have had a significant impact on the global economy and financial markets: Apple, Microsoft, Amazon, Alphabet (Google), Meta (Facebook), Nvidia, and Tesla.

[2] Factset, Mercer. Data as of October 2025.

[3] MIT Technology Review, by James O'Donnell and Casey Crownhart, May 20, 2025.

[4] Federal Reserve Bank of New York, Secured Overnight Financing Rate (SOFR).