For most of the last century, public markets captured the growth stories that mattered. That is changing. The companies building the next wave of industries are spending more of their value-creation years privately held, and public-market-only portfolios are increasingly arriving late to the compounding.
Private markets did not become a mainstream portfolio consideration overnight. Their rise reflects decades of structural change in how companies are built, how banks lend, and how capital flows between institutions and individuals.
Global private capital AUM reached an estimated $24.5 trillion to $25 trillion in 2025, combining traditional closed-end fund structures with broader alternative vehicles. This growth is not cyclical. It reflects a multi-decade reorientation of capital away from public markets and toward private ownership.
Source: McKinsey & Company, Private Equity Report 2025.
Historical Context
The roots of modern private equity trace back to the post-World War II era, when early venture capital firms began backing high-growth companies that lacked access to traditional bank financing. The model was simple but differentiated: patient capital, concentrated ownership, and returns driven by the long-term growth of businesses rather than the daily pricing of public markets.
Structural Shift 01: Companies Are Staying Private Longer, and Growing More While They Do
One of the most significant shifts affecting public-market investors has been the migration of value creation from public markets into private markets. In the late 1990s, the median age of a U.S. technology company at the time of its IPO was four years. By 2024, the average age of companies going public had increased to roughly fourteen years, a ten-year extension representing the period in which companies typically move from early commercialization to scaled, mature enterprises.
The Private Market Is Now Where Most Companies Scale
For decades, investors could reasonably assume that the public markets represented the most important and fastest-growing businesses in the economy. That assumption is becoming less true. Today, the majority of U.S. companies generating more than $100 million in annual revenue remain privately held, meaning a growing share of business formation, scaling, and value creation occurs outside traditional public market indexes.
For advisors, the implication is not that public markets are insufficient, but that they no longer provide comprehensive exposure to the full spectrum of business growth. A growing share of innovation, revenue growth, and enterprise value creation now occurs in companies that remain private for much or all of their lifecycle.
Structural Shift 02: Private Markets Have Grown to Institutional Scale
Over the last two decades, private markets evolved into a core component of the global capital-formation system. Global AUM exceeded approximately $13 trillion by mid-2023 under traditional closed-end fund methodologies; when broader structures are included, estimates have ranged as high as $22 trillion. Private equity alone, excluding venture capital, now represents more than $8.2 trillion in global AUM, roughly ten times larger than it was twenty years ago.
For advisors, the significance is not simply that private markets are larger than they once were. It is that the infrastructure surrounding the asset class has matured. Vehicles, reporting, custody solutions, and implementation pathways that were once available only to large institutions have increasingly become accessible through advisor-managed portfolios. Understanding those structures is now becoming as important as understanding the underlying asset classes themselves.
Structural Shift 03: The Institutional Allocation Gap Is Narrowing
Inside many institutional portfolios, the conversation today often centers less on whether to allocate and more on implementation, manager selection, pacing, liquidity management, and portfolio construction.
The allocation gap between institutions and individual investors reflects differences in liquidity needs, governance structures, investment horizons, and access. Institutions often manage perpetual pools of capital and can tolerate longer investment timelines, while individual portfolios must balance growth objectives against spending needs, tax considerations, and behavioral factors.
The significance of the allocation gap is not that individual investors should mirror institutional portfolios. Different investors have different objectives, liquidity needs, and constraints. Rather, the gap highlights an important reality: many of the world’s largest and most sophisticated investors have spent decades integrating private markets into portfolio construction. For advisors, understanding why they do so has become increasingly relevant to their client conversations around diversification, long-term wealth creation and preservation, and portfolio design.