I spend my days studying where growth is created and who actually captures it. The core message is simple: more growth now occurs before companies ever list on an exchange. That has changed the investing game for families, advisors, and institutions alike.
We have entered a period in which many of the most valuable businesses remain private for longer. The public markets still matter, but they reflect a later stage in a company’s life. That shift affects diversification, return potential, and how investors build portfolios. My goal is to explain why this is happening, what it means for you, and how to think through access and risk.
The Core Shift: Growth Moves Earlier
For decades, most investors built wealth through public stocks. That path is still viable. But much of the growth now occurs before companies go public. Think about the biggest names in technology and artificial intelligence. Many remain private for extended periods. Their early investors capture large gains while the public waits for an eventual listing.
“People get rich before stocks go public.”
I said this on stage to a room of investment leaders because it reflects how capital formation has evolved. Private rounds are larger. Late-stage private valuations are higher. These rounds can fund expansion for years, delaying the need to list.
View this post on Instagram
Three Reasons Investors Need Private Market Access
Several structural changes sit behind this trend. They are not abstract. They affect what is available to public shareholders and what is captured by private investors.
- The public market is smaller: In 1996, there were about 8,000 publicly traded U.S. stocks. Today there are roughly 4,000, even though the economy is much larger.
- Top firms stay private longer: Companies can raise billions without listing. They avoid quarterly pressure, headline swings, and short-term expectations.
- Public investors enter later: By the time a major company lists, a large share of its value creation can be behind it. Early growth accrues to private holders.
Across the past two decades, private equity has outperformed broad public equity in many periods. Past results do not guarantee future returns, but the direction of travel is clear. More growth is captured before an IPO.
Why The Public Market Is Shrinking
Two forces reduced the public roster. First, mergers and acquisitions removed many mid-size public firms. Second, private capital grew into a powerful funding source. Venture capital, growth equity, and private equity funds raised record levels of capital over the past decade. With that capital came choice. Founders no longer needed to list early to scale.
Meanwhile, the U.S. economy has expanded by about three and a half times since the mid-1990s. Yet the number of listed companies fell by roughly half. That gap means index investors may own a thinner slice of the real economy than they think. It also means public stock pickers have a smaller hunting ground.
Why The Best Companies Stay Private Longer
There are three main reasons leaders keep their private lives private: control, flexibility, and focus. Control means founders and boards can keep tighter ownership and decision rights. Flexibility means they can raise capital when they want, on terms that suit long-term plans. Focus means less time on quarterly earnings theater and more time building products and teams.
Volatility also plays a role. Public stocks react to headlines and short-term news. For many leaders, that noise distracts from multi-year goals. Staying private delays that tradeoff. As a result, more of the growth curve happens outside the public eye.
“They don’t need public markets for access to funding, and they don’t want the headaches of being public.”
This is not a critique of public markets. It is a statement about choice. When the private route offers enough capital at an acceptable cost, many executives take it.
What Late Entry Means For Public Investors
For public investors, later entry into a company’s life can compress return potential. It does not mean returns disappear. It does mean a chunk of growth is already allocated to early holders. Headlines around future landmark IPOs will reflect this. These firms will list at large, mature valuations. Public investors may be buying well into a company’s middle age, not its early days.
That does not make public markets obsolete. It changes how we use them. Indexes remain an anchor. Dividends, quality, and cash flows still matter. But investors seeking exposure to earlier-stage growth may need a plan for private assets.
Private Equity Performance And The Catch
Over 20 years, private equity has produced competitive returns relative to public equity in many studies. That trend aligns with what we see in late-stage private deals and large buyouts. Yet averages hide wide differences. Manager selection, fees, and vintage year timing can swing outcomes.
Access also matters. The best funds often have waitlists. Minimums are high. Liquidity is limited. Reporting is less frequent. Valuations are model-based between funding rounds. None of that is a reason to ignore the space. But these features require planning and a clear risk budget.
Here is the plain truth. If you only own public stocks, you might be investing in a smaller and later slice of the economy. If you add the right private exposure, you may align your portfolio more closely with where growth is created today.
How I Think About Private Access
I look for access that is sensible, diversified, and mindful of liquidity. For qualified investors, this can include fund-of-funds, secondary funds, and vehicles that pool opportunities across vintages. For many households, the right exposure might be small, staged, and balanced with liquid assets.
Secondary markets are one avenue. They let investors buy stakes from existing holders. Pricing can be attractive during market stress. The tradeoff is limited information and deal-by-deal complexity. Late-stage funds are another path. They target mature private companies with clearer revenue and scale. The tradeoff there is higher valuations and competition for allocations.
Risk, Liquidity, And Fit
Private assets come with unique risks. Lockups can last years. Cash calls can arrive at inconvenient times. Valuations can lag real conditions. Strategies differ widely across venture, growth, and buyout. Past winners are not guaranteed to repeat.
Portfolio fit is about purpose. What return are you seeking? What drawdowns can you ride out? How much illiquidity fits your plan? Map those answers before chasing access. Treat private assets as part of a long-term allocation, not a short-term trade.
Signals I Watch
I track three things to judge where we are in the cycle.
- Funding conditions: Are late-stage rounds happening at higher or lower valuations? Are terms founder-friendly or investor-friendly?
- Exit paths: Are IPO windows open? Are strategic buyers active? Are secondaries priced at a discount or a premium?
- Dispersion: Are results spread out across managers and sectors? High dispersion can reward careful selection.
These signals shape pacing and sizing. They also help set expectations. Private markets can move in waves. Patience and discipline improve the odds.
What This Means For Everyday Investors
Not everyone can or should hold a large private allocation. Many investors are best served by low-cost public funds, steady savings, and a long horizon. But the shift from public to private growth affects everyone. It affects index composition. It affects sector weightings. It affects how quickly new tech and health breakthroughs appear inside public portfolios.
“Investors without private market access could be investing in a smaller and smaller version of the real economy.”
That line may sound blunt. It is also accurate. The solution is not to abandon public markets. The solution is to assess your goals and explore whether a measured slice of private exposure makes sense within your risk limits.
Practical Steps To Consider
Here is a simple process I use when advising on this topic.
- Define the purpose: Growth enhancement, diversification, or both. Write it down.
- Set guardrails: Establish a target range, such as 5% to 15%, based on liquidity needs and risk tolerance.
- Stage commitments: Commit across multiple years and managers to diversify vintages and strategies.
- Balance liquidity: Pair illiquid holdings with ample cash and liquid bonds or equities.
- Monitor pacing: Review commitments, unfunded amounts, and distributions twice a year.
None of this removes risk. It gives risk a framework. That is how private exposure should be handled within a plan.
On High-Profile IPO Rumors
There is frequent chatter about major private companies going public. Timelines often shift. Sometimes a business lists a year later than expected. Sometimes it waits even longer or chooses another route. Do not build a plan around a rumored date. Build a plan around the long-term rise of private value creation and a disciplined way to access it.
If and when a marquee firm lists at a massive valuation, remember what that means. A large share of early growth was captured by private holders. Public investors can still do well from that point, especially if the company continues to compound. But the easy early growth phase is in the rearview.
Final Thought
Public markets remain a core engine for wealth building. They are liquid, transparent, and accessible. But more growth now takes place before a ticker exists. That is not a passing fad. It is a structural shift driven by abundant private capital and leaders’ desire to build out of the spotlight.
Investors who ignore private markets risk owning a later and smaller slice of the economy. Investors who chase them without a plan risk regret. The right approach lives in the middle: measured access, disciplined sizing, clear goals, and patience. That is how I guide clients, and it is how I build my own plan.
Frequently Asked Questions
Q: How much of my portfolio should be in private investments?
There is no single right number. Many long-term investors consider a small allocation, often in the 5% to 15% range, based on liquidity needs, risk tolerance, and time horizon.
Q: Are private markets only for institutions and the wealthy?
Access is improving, but many opportunities still require accreditation and higher minimums. Some platforms and funds offer smaller entry points. Do thorough due diligence before investing.
Q: What risks are unique to private equity and venture capital?
Illiquidity, long lockups, and uneven results across managers stand out. Valuations can be less frequent, fees higher, and outcomes more dispersed than in public markets. Plan sizing and pacing carefully.
