Source: Hamilton Lane Data as of 3/31/2023 (August 2023)

Source: World Bank, 2019

Source: Capital IQ (February 2023)

There is evidence of public company retrenchment, and over the last two decades, public markets have become increasingly more concentrated, dropping from more than 7,800 publicly listed companies at the beginning of 2000, to roughly 4,500 at the end of 2022. The dwindling number of public companies has made diversification beyond them even more important.

Number of Listed US Companies

Public & Private Companies
by LTM Revenue > $100M

Private markets’ outperformance over their public equivalent is driven by a variety of factors. First, there is a liquidity premium associated with private markets: Higher returns may be compensation for longer lockup periods with investors’ capital.

Another reason may be that companies are staying private for longer and, in turn, have the potential to experience more of their growth and innovation before going public. The below chart describes this well. As tangible examples, two of the 10 largest tech IPOs waited 10 and 12 years, respectively, before going public, long after they had disrupted the industries in which they operate.

Private investments can also be a valuable diversifier, in part due to the much wider pool of companies within private markets versus the public markets. There are more than 140,000 private companies globally with annual revenues above $100 million, compared with just 19,000 public companies at the same revenue level.

While the public markets have concentrated in recent years, each of the various private market strategies have expanded and grown, as you can see in the chart below.