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For decades, building wealth meant buying stocks and bonds, preferably diversified and held for the long term. That advice still holds.
But investors are asking a new question: Is a portfolio made up only of public markets enough?
From pension funds and endowments to high-net-worth investors and, potentially, retirement savers in 401(k)s — private assets are moving from the sidelines toward the mainstream.
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In the late 1990s, more than 8,000 companies traded on U.S. exchanges. Today, that figure is closer to 4,000 to 4,700 — a roughly 50% decline.
The drop isn’t because American entrepreneurship has slowed. It’s because companies stay private longer, backed by deep pools of private capital that lighten the pressure to list publicly.
For investors, that shift matters. A portfolio limited to public equities now captures a smaller slice of corporate growth than it once did.
Globally, the imbalance is even starker. There are 25 times more private, private-equity (PE) or venture capital (VC), backed companies than public businesses, yet PE and VC together represent only 12% of the capitalization of global public-equity markets.
The shift extends well beyond equity. Private credit has stepped in where banks pulled back, private real estate includes institutional assets that rarely trade publicly, and infrastructure — from data centers to renewables — is increasingly financed through long-term private capital.
Why private assets are entering 401(k)s
Today’s retirement landscape looks very different than it did a generation ago.
That may be starting to change. Target-date funds (TDFs), the “set it and forget it” investment options many people use in their 401(k) plans, now represent more than $3.5 trillion in assets. About $115 billion of that total includes some exposure to private equity (PDF) or private real estate, and the amount continues to grow.
Private assets behave differently than public assets. They involve less liquidity, more complex fee structures, wider dispersion between top and bottom managers and valuation lags that can smooth, but not eliminate volatility.
New structures such as evergreen funds, semi-liquid vehicles and professionally managed TDFs are making private assets operationally feasible.
For most investors, private assets work best as part of a diversified portfolio, accessed through experienced managers and sized appropriately for long-term goals.
Private assets by the numbers: Public vs private
Private assets are not a single category. Each plays a different role in portfolios and has grown relative to its public counterpart.
Private equity. Private equity and venture capital totaled slightly more than $11 trillion in assets under management at the end of 2023, compared with more than $87 trillion in global public-equity market capitalization.
While smaller in aggregate size, private markets back significantly more companies, meaning investors focused solely on public markets may miss earlier-stage value creation as companies remain private for longer.
Private credit. Private credit now represents 7% of U.S. debt outstanding and more than 20% of total U.S. credit markets when non-bank sourced lending is included.
Its structure differs from traditional bank lending and public debt markets, often offering higher yields alongside trade-offs such as lower liquidity and more complex structures.
Private real estate. The professionally managed global real estate market is valued at $13 trillion, while public real estate investment trusts (REITs) represent only about $2 trillion of U.S. real estate holdings.
In other words, most institutional real estate remains privately held, not publicly traded.
Private real estate may show lower volatility and less correlation to stocks vs public REITs — though valuations move more slowly, often due to lower transaction volume.
Infrastructure. Similarly, most infrastructure assets — including airports, toll roads, renewable energy projects and data centers — are financed through private markets rather than public equities.
Institutional investors often allocate to private infrastructure for its long-term contracted cash flows and potential inflation linkage, recognizing differences in liquidity compared to listed infrastructure companies.
The bottom line
Investors aren’t turning to private assets because public markets no longer work. They’re doing so because public markets no longer capture the whole economy.
Think of it this way: What if you needed specific ingredients for your favorite meal? When you went to the grocery store, you found half the aisles were not accessible. There is no way you could get all the ingredients you need.
This is what public-only investing feels like — inaccessibility to key ingredients.
With more economic growth occurring outside public markets, portfolios built solely from public stocks and bonds may miss meaningful sources of return and diversification.
Private equity, private credit, private real estate and infrastructure are no longer viewed as “alternatives” by institutions — and they’re increasingly finding a place in long-term wealth-building strategies, including 401(k)s.
With millions of Americans depending on 401(k)s for retirement, it’s critical to thoughtfully strengthen the system to support long-term financial security.
