For the last two decades, global capital markets have been undergoing a silent but aggressive transformation known as “de-equitisation”. The number of publicly traded companies has more than halved, while the pool of private capital is exploding.
The pool of privately held companies has always vastly outnumbered the public universe (3,000 to 1), providing the widest range of opportunities to source great investments for those willing and able to do the work. Private market companies also grow faster than their public counterparts, providing by far the bulk of exciting growth opportunities that drive returns. But it is now also the case that the most attractive high growth companies are choosing to remain unlisted for longer. As they do so, traditional public equity investors are increasingly locked out of the steepest phases of corporate value creation.
Consequently, private equity (PE) and venture capital (VC) are becoming increasingly larger allocations in developed-market institutional portfolios but are also beginning the transition from exclusive institutional domains into essential components of a diversified, modern portfolio, opening a wave of “democratisation” in alternative investments.
The shrinking public pool
De-equitisation refers to the shrinking supply of publicly available equity. Since 1995, the universe of listed investment opportunities in developed markets (the US, EU and UK) has declined by 36%, with the US universe more than halving (52%).
Based on recent 2024/2025 data, only 14% of US companies generating over US$100 million in annual revenue were publicly listed. The remaining 86% are privately held. Since 2000, the number of PE-backed companies has grown by more than 600%.
Why are companies fleeing the public sphere?
- The burden of being public: Regulatory costs, relentless quarterly earnings pressure and intense public scrutiny have made public listings arduous and expensive.
- Abundant private capital: Companies no longer need to go public to raise billions. The global PE assets under management (AUM) surged from under US$1 trillion in 2000 to over US$10 trillion today. This provides significant firepower for companies to stay private and still source capital for growth and provide liquidity for their investors.
- M&A and take-privates: Private equity firms hold record amounts of “dry powder” (uninvested capital) and are actively buying out undervalued public mid-cap companies, permanently removing them from the stock exchange. Meanwhile, the largest listed companies have strong cash flow, relentless growth targets and are aggressively adding capabilities through acquisition, removing opportunities from the market.
The staggeringly large private pool
It is often overlooked how large the private market is. Well over 99% of firms are private, even across all developed markets and despite extremely well-functioning public exchanges. Public companies represent a tiny fraction of the total business landscape, with private market opportunities outnumbering public market ones by over 3,000 to 1.
The growth differential
Private market companies are growing faster than public market companies: On aggregate, it is estimated that annual revenue growth rates of private companies are between 2.2x (US) and 6x (EU) higher than public companies.
Not only are growth rates higher in the private market, but so is the total value of growth created. It is estimated that ~65-70% of corporate revenue growth in the US now occurs in the private market. Companies now wait until they have massive revenue (US$1 billion+) before listing, and all that “hyper-growth” phase (0 to US$1 billion) happens privately. In Europe, it is even more extreme: Almost 80% of net new revenue creation in the European mid-market comes from unlisted firms. European public stocks are heavily weighted to low-growth “old economy” sectors (Banks, Energy), while the growth (Tech, Services) stays private. The public market is effectively a “dividend machine”, not a “growth engine”.
The impact on investors
This structural shift has fundamentally altered the risk-and-reward dynamics for both institutional and everyday retail investors.
- The “Growth Phase” lockout
Historically, public markets democratised growth. Amazon went public in 1997 with a valuation of roughly US$440 million, allowing public investors to capture virtually all of its hyper-growth. Today, companies like SpaceX, OpenAI and Stripe are valued at well over US$100 billion, while remaining entirely private. By the time modern tech “unicorns” finally go public, their highest growth phase is often behind them, leaving public investors to buy into mature, slower-growing businesses.
- Extreme market concentration
Because new, innovative companies are not replenishing the public indices, the market has become dangerously top-heavy, reducing portfolio diversification.
- The yield vs. growth divide
Public markets are increasingly becoming venues for “yield” rather than “growth”. Mature public companies return capital to shareholders via dividends and massive stock buybacks.
Meanwhile, the actual top-line revenue expansion and disruptive innovation are occurring out of sight, locked inside PE and VC portfolios.
Evolving regulatory landscape in response to investor demand
If 86% of mid-to-large companies are private, investors must adapt to regain access to the full investable universe. The alternative investment industry is currently undergoing a massive “democratisation” phase to provide private market opportunities to the estimated US$80 trillion in individual investor capital.
As of early 2026, institutional investors have continued to increase their allocation to alternative assets, like private equity and venture capital, to approximately 30% of their total portfolios, rising from 10% in 2000.
Individual investors are beginning to follow, and regulators are attempting to accommodate the demand to facilitate access. In Europe, the ELTIF 2.0 (European Long-Term Investment Fund) framework is working to remove barriers to access. ETFs embedding private market strategies are being trialled, blurring the lines between daily public liquidity and private market yield. A 2025 executive order in the US instructed the Department of Labor to facilitate access to alternatives, paving the way for 401k retirement plans to incorporate private equity and venture exposure in portfolios. As this continues to evolve, individual investors are expected to represent 22% of total private market AUM by 2030.
