An executive order intended to extend 401(k) access to private market investments is poised to significantly expand the private market investor pool, raising the stakes of allocation decisionmaking for institutional investors.
The order added urgency for institutional investors to maximize their strategic positioning within the fast-growing and increasingly competitive private market landscape, particularly in ascendent segments. Against this reconfigured backdrop, concerted private market exposure is no longer a niche consideration, but an imperative for sustaining relevance. Financial services experts offered their views of the key forces behind the shift and the implications of ongoing private market growth for institutional allocators.
Rising Execution Demands
Though public investments continue to comprise the largest share of total market value and institutional portfolio allocations, private markets have seen unexpected momentum in a short period of time. Their total value more than doubled to $14.24 trillion from $6.88 trillion since 2019 alone, according to Ocorian’s Global Asset Monitor.
“A lot of innovation is happening in the private markets,” says Steve Brotman, the founder of and managing partner in Alpha Partners. He points to technology as a vivid case in point for what that looks like in practice.
“When I started my career 30 years ago, tech was 2% of the GDP; today, it’s 14% of the GDP,” Brotman says. “In the next 20 years, tech could make up as much as 50% of global GDP and an even higher proportion of stock market performance. As a CIO, you can no longer ignore tech.”
He adds that companies including OpenAI, SpaceX and Anthropic have reached hundreds of billions of dollars in valuation without going public.
Shriram Bhashyam, chief operating officer of the investment platform Sydecar, similarly cites the trend toward delayed initial public offerings as a signal of robust private-market growth.
“In venture, companies are waiting 12 to 14 years before IPO,” he says, up from five or six years in the past.
Bhashyam attributes this pronounced shift to higher benchmarks for revenue, revenue growth and profitability that a company must now achieve before going public, in addition to a largely closed IPO window and tightened mergers-and-acquisitions market since 2022. Taken together, Bhashyam says these forces have created new liquidity pressures for many institutional investors, forcing some to reallocate out of venture altogether. The venture market, in turn, has increasingly turned to the secondary market to generate liquidity when exits are delayed.
On the limited partner side, meanwhile, secondary markets are being leveraged as direct access points “to double down on winners and drive down the average cost per share by purchasing common stock, or earlier classes of preferred stock, at a discount,” says Bhashyam, previously a co-founder of EquityZen, a secondary market exchange recently acquired by Morgan Stanely.
Though secondaries offer some investor flexibility, Brotman argues that they should be approached as an avenue of opportunity, rather than a circumstantial fix for illiquidity or access constraints. Secondaries may allow allocators to access established managers or more mature assets, but they do not fundamentally change the long-term, relationship-driven nature of private-market investing.
“You can’t just dive in and dive out and swap out partners and go back and forth,” he says. “You have to be persistent.”
Navigating Mixed Valuation Signals
It is no secret that the extended investment horizons, systemic illiquidity and data scarcity inherent to private markets present unique challenges for valuation frameworks and exit planning.
Brad Foster, head of fixed income and private markets at Bloomberg Professional Services, observes that as more capital flows into private credit, institutional allocators have begun to anchor valuations more explicitly to public-market signals and make allocation decisions within a unified public-private credit framework, rather than siloed buckets. Despite these efforts, Foster sees outstanding gaps in the surrounding data plumbing.
“Much of private credit still relies on unstructured, document-based information and inconsistent classifications, which makes systematic comparison difficult,” Foster says. “While managers are adopting public-market tools and benchmarks, the industry lacks a unified security master that truly bridges public and private instruments.”
This challenge is becoming especially urgent as retail participation changes the calculus for asset managers and asset owners alike.
“Greater scale, broader distribution and heightened scrutiny demand the same analytical rigor, transparency and infrastructure that already exist in public credit,” Foster says.
Far from analytical rigor and transparency, Brotman admits that subjectivity and “euphoria” are likely at play in valuations for certain high-growth segments of the private market.
“When an engineer leaves OpenAI to start a new company and they raise a billion dollars at a $3 billion valuation, and all they have is a piece of paper, it’s hard to not call that some type of euphoria,” Brotman says. “But the stakes that we’re talking about are pretty massive. The opportunity set is pretty massive.”
Brotman argues that the right private-market posture for institutional investors depends on their starting point and their time horizon. Institutions with short horizons or traditional 60/40 portfolios may already meet their objectives without significant private-market exposure. But institutions with long-duration mandates of 10, 20 or 30 years will generally need substantial private equity and venture allocations in order to outperform and deliver long-term value. What matters most, Brotman says, is not a universal target allocation, but how mature an institution’s manager base is and whether it has durable relationships that work.
Brotman also notes that current market conditions create a tactical opportunity. Many institutions that over-allocated to private markets during 2021-22 are now seeking liquidity and selling positions on the secondary market. This has opened access for institutions that were previously under-allocated. As a result, under-exposed allocators can use secondaries to enter private markets or improve the quality of their manager relationships, often by acquiring more mature assets from distressed sellers.
In short, says Brotman, “I believe that this is a long-term super trend, and you want to have more and more exposure to the asset class.”
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