Why have private markets grown faster than public?

The short answer

Two trends ran in parallel over the past two decades. Private markets — buyout, venture capital, private debt, infrastructure, real estate — expanded dramatically. Public equity markets, especially in the United States, contracted in number of listed companies even while index values rose.

The standard explanation focuses on the cost of being public: Sarbanes-Oxley compliance, quarterly disclosure pressure, and litigation risk. The deeper cause is harder to capture in a headline: as private capital became deep enough to fund a company through its growth phase, going public stopped being the only path to scale. Companies stayed private longer, then sometimes never listed at all.

The shift is not just regulatory; it reflects a structural change in how growth capital flows.

→ New to private markets? Financial education across regimes

What the data shows

The most cited references for these trends are McKinsey’s Global Private Markets Reports, Preqin’s annual data, and academic work by Doidge-Karolyi-Stulz on listing trends.

Key figures (Preqin / McKinsey / Doidge-Karolyi-Stulz, 2014-2024):

• Global private markets AUM: $3.8 trillion (2014) → $13.1 trillion (mid-2023) → projected $18 trillion by 2024 according to Preqin
• US listed companies: declined from roughly 7,300 in 1996 to approximately 4,300 by the mid-2020s — a near-halving
• Private equity AUM specifically: $8.2 trillion at end-2023, expected to exceed $8.5 trillion by 2028 per Preqin
• Private debt AUM: $1.7 trillion (2023), up 27% year-on-year — fastest-growing segment
• Median US IPO age of company: rose from ~6 years pre-2000 to ~12 years post-2010
• Top 25 private markets managers: 41% of total fundraising in 2023 vs 29% average over the prior decade

The exception that nuances: the "decline" in listed companies is concentrated at the small-cap end. The number of large-cap listings has been relatively stable; what disappeared were micro-cap and small-cap public companies that previously used IPO as growth capital and now use venture and growth equity instead.

→ Dataset: S&P 500 historical returns

Why it happens — the macro mechanism

Three feedback loops have reinforced each other over the past two decades.

Cost of going public rose sharply. Sarbanes-Oxley (2002) added meaningful compliance costs estimated at several million dollars annually for new public companies, with disproportionate impact on smaller issuers. Continuous disclosure regimes, audit costs, and exposure to securities litigation made the public path less attractive for growth-stage businesses.

Private capital became deep enough to substitute. The angle that distinguishes recent decades from prior ones: pre-2000, a company needing $200 million in growth capital almost had to go public. Post-2010, late-stage growth equity rounds in that range became routine — Tiger Global, SoftBank, sovereign wealth funds, and crossover funds could write very large checks privately. The cycle was self-reinforcing: as private capital deepened, more companies stayed private; as more companies stayed private, more capital flowed to private vehicles, deepening them further.

Intangible-heavy business models fit private structures better. Software, biotech, and platform businesses often need years of unprofitable growth before scale economics emerge. Quarterly reporting punishes this trajectory; private boards tolerate it. Private equity and venture funds can also use governance structures that reward founder-CEO alignment more directly than public boards.

Synthesis by regime: in the pre-2008 regime, private markets meant primarily LBO buyouts of mature businesses. In the 2008-2022 broadening regime, private markets expanded into private debt, infrastructure, and large-scale growth equity, creating substitutes for nearly every public market function. In the 2024+ retailization regime, evergreen funds, BDCs, and interval structures are extending access to high-net-worth retail, making private capital effectively continuous rather than episodic. The transition parameter is the median size of a private growth equity round — when it crossed the historical IPO threshold around 2014-2015, the "need to list" eroded.

Companies don’t go private because public markets failed — they stay private because private capital became deep enough to make listing optional.

→ Framework: Market regimes

What it means for different economic actors

Public equity investors. The investable universe at the small-cap end has shrunk. Russell 2000 small-cap quality has changed compositionally as the strongest growth companies stay private longer, leaving the public small-cap segment with relatively older, lower-growth businesses on average.

Pension funds and sovereign wealth funds. Allocations to private markets have risen materially over two decades. Many large public pensions now target 20-40% in alternatives, vs single-digit shares in the 2000s, reshaping how ultimate ownership of US economic assets is distributed.

Retail investors. Direct access to private markets remains gated by accredited investor rules and long lockup periods. The opening of evergreen and interval structures since 2020 has begun to change this, but at the cost of higher fees and access to lower-tier managers.

A common error is to interpret private market growth as a sign of dysfunction in public markets. The data suggest a different story: private capital has expanded the financing options available to companies, with public listing now one option among several rather than the default endpoint of growth.

Practical observation

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Frequently asked questions

Is the decline in listed companies a US-specific phenomenon?

The decline is most pronounced in the US, but European listings have also stagnated since 2000. Asian markets, particularly China and India, have continued to add listings. The driver is partly regulatory (Sarbanes-Oxley is US-specific) and partly stage-of-development — markets with less mature private capital ecosystems still depend more on public IPOs as growth funding mechanisms.

How does the rise of private markets affect price discovery?

Public market price discovery applies to a smaller share of total economic activity than two decades ago. Private valuations rely on infrequent funding rounds, limited transaction comparables, and self-reported NAVs. This creates an information asymmetry between public and private capital that can persist across cycles, with private valuations sometimes adjusting more slowly than public markets to changing fundamentals.

Will retailization of private markets continue?

Retail vehicles for private markets have grown rapidly since 2020 — record $350 billion in evergreen funds reported by 2024, with US 401(k) regulatory changes opening additional access. The trajectory depends on regulatory evolution, but the structural pull is strong: as a larger share of corporate value sits in private hands, excluding retail from access creates political pressure for democratization.

Last updated — 23 July 2026