Private Markets Reshape Global Finance

In Brief:

Private capital assets are projected to surge from $13 trillion to over $30 trillion in the next five years, fundamentally transforming how companies access capital and stay private longer. Three executives from Morgan Stanley, Apollo, and KKR—Elizabeth Dennis, Managing Director & Head of Global Client Coverage at Morgan Stanley; Natalia Tsitoura, Partner and Head of Sponsor Origination for Europe at Apollo; and Alisa Wood, Partner in Private Equity at KKR—shared insights on this seismic shift during Bloomberg's Women, Money & Power 2025 event in London. The panel revealed how post-crisis banking regulations created a $40 trillion opportunity as traditional lenders retreated, why there are now 40% fewer public companies than two decades ago, and how firms are racing to democratize access to private markets while grappling with the fundamental tension between maintaining illiquidity premiums and providing the transparency that mainstream investors demand.

Big Picture Drivers:

• Regulatory Evolution: Post-financial crisis banking regulations have fundamentally altered how banks lend, creating opportunities for private capital firms to fill the financing gap

• Market Transformation: There are 40% fewer public companies today than 20 years ago, with 85% of US companies with $100 million+ in revenue now remaining private

• Wealth Democratization: Traditional 60/40 portfolio models are being challenged as wealth management firms work to provide individual investors access to private markets previously reserved for institutions

• Capital Efficiency: The "dry powder" paradox—$1.3 trillion in undeployed private equity capital exists alongside $3.9 trillion in unrealized value, creating demand for creative exit solutions

Key Themes:

• Public-Private Convergence: The traditional boundaries between public and private markets are dissolving as private credit becomes more transparent and tradeable, with major corporations like Intel, AB InBev, and EDF tapping private markets for bespoke financing

• Operational Alpha Focus: Value creation in private equity has evolved from financial engineering and cheap leverage in the 1980s-90s to bottom-line operational improvements through lean manufacturing, Six Sigma practices, and universal employee ownership

• Ecosystem Partnerships: Banks and private capital firms have shifted from cutthroat competition to strategic collaboration, with banks providing origination and distribution while private capital firms offer patient, long-term capital

• Liquidity Innovation: The industry is addressing the exit drought through evergreen fund structures, secondary markets, and creative financing solutions rather than relying solely on traditional IPO exits

Key Insights:

• Manager Selection Premium: The dispersion in returns between top-tier and mediocre private equity managers exceeds 1,400 basis points, compared to just 200-300 basis points in public equities, making manager selection the single most critical decision for investors seeking to access private markets effectively.

• Scale Creates Access: Morgan Stanley's strategic acquisition of workplace equity administration platforms managing cap tables for over 50,000 high-growth private companies positions them to provide liquidity solutions, tender offers, and investment access that bridges the gap between private company employees holding illiquid equity and ultra-high-net-worth investors seeking private market exposure.

• Private Market Premiums Persist: Private equity investments should deliver 500-700 basis points above public market returns, and this premium is sustainable because the best managers continuously evolve their value creation playbooks rather than relying on outdated strategies from previous decades.

• Complexity as Competitive Advantage: KKR generates over 60% of exits through strategic sales rather than IPOs by deliberately targeting complex situations—public-to-privates, non-core divestitures from conglomerates—then creating simplified, high-growth businesses that strategic buyers want to acquire to improve their own portfolios.

• Investment Grade Dominates: Apollo's $700 billion credit business focuses predominantly on investment grade lending in a $40 trillion market, challenging the common perception that private credit primarily serves the leveraged loan, sponsor-backed segment of the market.

• Velocity Over Perfection: Leading private equity firms follow a disciplined approach of exiting investments when they reach 80% of potential value creation rather than waiting for the final 20%, recognizing that unforeseen black swan events often derail plans and that capital velocity matters more than maximizing every last dollar of return.

Memorable Quotes:

• "You can't eat IRR. You actually need multiple investor capital, capital coming back." - Alisa Wood, addressing the industry's exit challenges and emphasizing that paper gains and internal rates of return matter far less than actual cash distributions to investors

• "If you don't like change, you're going to like irrelevance even less." - Alisa Wood, explaining why private equity firms must constantly evolve their operational playbooks to maintain return premiums as competitors learn and replicate successful strategies

• "There are 19,000 private equity funds in the US. There are 14,000 McDonald's in the US. How are there more private equity funds than McDonald's? That's actually crazy." - Alisa Wood, highlighting the overcrowded nature of the private equity industry and underscoring why manager selection matters more than asset allocation decisions

• "Everything that's on a bank balance sheet is private credit. A loan to a corporate is private credit, a mortgage is private credit, a loan to a consumer is private credit." - Natalia Tsitoura, reframing the private credit discussion to emphasize that the market is far broader than just leveraged lending and encompasses the entire $40 trillion investment grade universe

• "We love complexity. The more complex the market is, the better we are." - Alisa Wood, articulating KKR's competitive strategy of targeting situations that other investors avoid, then using operational expertise to transform complicated businesses into simple, high-growth platforms

The Wrap:

The private markets revolution represents far more than a temporary dislocation—it signals a fundamental restructuring of global capital allocation that will define the next generation of investing. As regulatory constraints push banks toward fee-based services and away from balance sheet lending, private capital firms are stepping in to provide patient, flexible capital while simultaneously working to democratize access for individual investors. The convergence of public and private markets through increased transparency and trading liquidity, combined with innovative evergreen structures that reduce friction, suggests the traditional distinctions between asset classes will continue to blur. Success in this evolving landscape requires navigating the critical tension between maintaining the illiquidity premium that justifies private market allocations and providing sufficient liquidity and transparency to attract mainstream investor capital at scale.