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The Dominance of Private Equity

July 19, 2023 | Posted in: Insights, Investing

The following graph powerfully demonstrates the amazing growth and increasing dominance of private equity.

Note that the number of publicly listed companies has decreased slightly over the past twenty years to around 4,000 while private equity-backed firms now number roughly 10,000. Managing roughly $1 trillion in private equity funds, Blackstone alone is backing more than 250 companies.

This powerful trend brings with it both pros and cons. First, without the tyranny of meeting quarterly earnings expectations, private company executives should be able to manage for longer-term growth. Second, this trend should provide an upward bias to stock prices since investment dollars seeking public equity exposure will necessarily be funneled into a smaller number of companies. On the downside, public market investors will be unable to gain exposure to some interesting and exciting companies. Second, the fees charged by private equity firms will take an increasing bite out of the economic pie.