A report from the CFA Institute Research and Policy Center highlights a structural transformation in global capital markets, with private equity, private credit, real estate, infrastructure, and venture capital now managing more than $18 trillion in assets. The research, the first in a series on private market expansion, argues that the balance of power between public and private exchanges is shifting in ways that carry significant implications for investors, regulators, and the broader financial system.
Rhodri Preece, CFA, senior head of research at the center and co-author of the report, described the current environment as an inflection point. “Recent high-profile IPOs illustrate just how much the capital formation process is changing,” he said. “Increasingly, companies are listing on public markets at a much later stage of their development, after years of growth financed through private capital.” He added that this shift affects not only portfolio allocation but also how capital markets function, how risk is distributed, and how investors participate in economic opportunity.
The report identifies a self-reinforcing dynamic: issuers are drawn to private markets for flexible capital on their own terms, institutional investors chase diversification and higher returns, asset managers benefit from the fee premium private products command, and policymakers actively channel long-term private capital toward infrastructure and other strategic priorities. Co-author Cheryll-Ann Wilson, PhD, CFA, senior affiliate researcher at the institute, said no single constituency is responsible. “It is being driven by the mutually reinforcing incentives and actions of issuers, asset owners, intermediaries, and policymakers,” she said.
As private markets scale, the report warns, they alter price discovery, reshape benchmark composition, redistribute information, and influence how financial stress propagates. The trajectory over the next decade will demand a recalibration of policies and practices. Among the risks flagged are erosion of price discovery, valuation opacity, liquidity mismatches, and conflicts of interest. Retail investors face particular exposure as private market products reach a broader audience, potentially without adequate understanding. The deepening links between banks and non-bank lenders also raise concerns about how credit stress could travel through the system in ways harder to trace.
For investment professionals, the report sets out a clear agenda: stronger valuation discipline, more rigorous liquidity planning, better performance measurement, and sharper focus on governance and systemic risk. Public indices, the research notes, may increasingly reflect a narrower share of corporate innovation and economic dynamism as high-growth companies stay private longer. This trend aligns with recent data showing that LP appetite for private credit has dropped to 29% amid zombie fund fears, according to a Coller survey.
The report also underscores the growing importance of metrics like DPI (distributions to paid-in capital) as private equity splits over key performance indicators, with PwC flagging a structural divide. Meanwhile, a BofA survey indicates that wealthy investors are shifting to private markets and family firms as the $124 trillion wealth transfer gains speed, further fueling the trend.
The CFA Institute’s findings come as advisors increasingly adopt endowment-model approaches to position for the $84 trillion wealth transfer, and as firms like Morningstar Wealth tap Apollo, Franklin Templeton, and JPMorgan for multi-manager public-private models. The report serves as a call to action for regulators and industry participants to address the systemic implications of a financial system where an ever-larger share of capital formation occurs outside public view.
