The case, and the caveats
Why private markets, and why now
Three structural shifts moved a large share of economic growth and corporate credit out of public markets. That is the argument for paying attention. It is not an argument for buying anything — and this page is careful about the difference.
Shift one: companies stay private longer
The centre of gravity of company formation has moved. Counts of United States private companies have risen over the long run while the count of listed companies has fallen — roughly a 29% increase in private companies against a 32% decline in public ones between 1988 and 2022. Businesses that a generation ago would have listed to raise growth capital now raise it privately, repeatedly, and stay private through the years when their valuations compound fastest.
Where capital formation now happens
- Around 81% of United States companies with revenue above $100 million are privately held.
- Private company counts up ~29% (1988–2022) while listed company counts fell ~32%.
- The practical consequence: a public-only portfolio structurally excludes most large companies.
Shift two: public indices concentrated
As listings thinned, public benchmarks narrowed. The twenty largest companies grew from under 14% of global equity market capitalisation in 2015 to roughly 30% in 2024. An investor who owns the index owns considerably more single-name and single-sector risk than the same index delivered a decade ago. That is a diversification problem, and it is the honest reason institutional allocators started looking elsewhere — not a prediction that private assets will outperform.
Shift three: banks stepped back from lending
The third shift is in credit. Non-bank lenders’ share of the leveraged loan market rose from roughly 28% in 1994 to about 86% by 2023. Post-crisis capital rules made certain loans expensive for banks to hold, and the demand did not disappear — it moved to funds. Private credit is not a novel asset class so much as the same lending, relocated.
Sources, with dates
- Private and public company counts: United States Census Bureau Business Dynamics Statistics (2022) and World Federation of Exchanges, as derived April 2025.
- Companies above $100m revenue: S&P Capital IQ, as of 31 December 2024.
- Index concentration: MSCI ACWI IMI constituent market capitalisation, data as of November 2025.
- Leveraged loan market share: S&P LCD and Pitchbook LCD, series through 2023.
- Compiled from BlackRock’s published private-markets education material. Figures are as-of dated and should be re-verified before reuse in any dated document.
What investors are actually paid for
Two premia are usually offered as the compensation for private-market risk, and they are worth naming precisely because they are frequently conflated.
The illiquidity premium is the additional return an investor may require for giving up the ability to sell on demand. It is a compensation argument: you accept a multi-year hold, and you expect to be paid for the constraint. Our white paper on what investors are paid to wait works through the arithmetic.
The complexity premium is different. It is the return attributed to skill in situations that are genuinely hard — carve-outs, restructurings, bespoke credit, assets that need operational work. It is not a premium the market pays automatically for holding a category. It is a premium a capable manager may earn and an incapable one will not, which is why manager and sponsor evaluation matters more here than in public markets.
The honest version of the return claim
- Reported private-market returns are calculated from appraised values and manager-reported marks, not from continuous market prices.
- Composite benchmarks carry survivorship and selection effects that public indices largely do not.
- Dispersion between top- and bottom-quartile managers in a single strategy and vintage is typically far wider than dispersion between public managers.
- Consequently: past category returns are a poor forecast of your result. The manager, the entry price, and the fee load do most of the work.
What it costs
Four trade-offs, each with a page of its own. Liquidity — exits run from weeks to years, and structures that advertise liquidity contain mechanisms that suspend it precisely when everyone wants out. Pricing — values between transactions are estimates, indicative rather than executable. Fees — layered structures can absorb a startling share of gross return, and the arithmetic is unforgiving. Information — lighter disclosure moves the diligence burden onto you, and trust is not due diligence.
What this page deliberately does not do
It does not tell you what percentage of a portfolio belongs in private markets. We do not publish it, for a reason worth stating plainly: a target allocation is investment advice, and InvestNow is not an adviser. What we will do is name three questions worth asking.
- Time horizon. Over what period can this money be genuinely untouchable — not inconvenient to reach, but unavailable?
- Liquidity need. What claims might arrive on this capital before the exit, including the ones you cannot schedule?
- Concentration. What else in your balance sheet — employer equity, a business, a property — already carries the same risk you are about to add?
At a minimum, those are the questions a qualified adviser will ask you.
Educational only. InvestNow is a demonstration platform. This page is general information, not investment, legal, or tax advice, and not an offer or solicitation of any security. Private-market investments are speculative, illiquid, and can lose their entire value. Consult a qualified professional about your circumstances.