Chart of the Week

The S&P 500 Index boasted an impressive 15% return over the first half of the year, but much of the performance was driven by a handful of mega-cap technology companies. Meanwhile, private companies represent a growing opportunity set, with over 90% of all U.S. companies being privately held. Further, private companies don’t just outnumber their publicly listed counterparts, they also offer diverse opportunities spanning a wide array of sectors and industries.

Recent growth in the total number of private companies has been accompanied by an increase in assets held in private markets, as shown in the chart above. Assets under management have grown at 14% per annum in recent decades, from less than $1 trillion in 2000 to over $15 trillion in 2023. In our view, this points to the unique opportunity set, especially as many private companies feature prudent financial leverage, high-quality growth, and attractive valuations.

We believe diversification is increasingly important given the growing concentration in public markets, and the historical returns of private capital showcase its benefits in this realm — private assets have offered lower volatility in returns and have featured a low correlation to public markets. In our view, qualified investors should consider the unique and expanding opportunities available in private markets when building a diversified, long-term portfolio.

Alternative investments, such as hedge funds, private equity, private debt and private real estate funds are not appropriate for all investors and are only open to “accredited” or “qualified” investors within the meaning of U.S. securities laws.

Alternative investments carry specific investor qualifications which can include high income and net-worth requirements as well as relatively high investment minimums. They are complex investment vehicles which generally have high costs and substantial risks. The high expenses often associated with these investments must be offset by trading profits and other income. They tend to be more volatile than other types of investments and present an increased risk of investment loss. There may also be a lack of transparency as to the underlying assets. Other risks may apply as well, depending on the specific investment product.

Private capital investments are complex, speculative investment vehicles not appropriate for all investors. They are not subject to the same regulatory requirements as registered investment products and engage in leverage and other aggressive investment practices. There is often limited (or even non-existent) liquidity and a lack of transparency regarding the underlying assets.

S&P 500 Index is a market capitalization-weighted index composed of 500 widely held common stocks that is generally considered representative of the US stock market.

An index is unmanaged and not available for direct investment.

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