The evolution of market structure
Managing illiquidity risk across public and private markets
Over the past 50 years, the roles of public and private capital markets have changed slowly but profoundly. In both markets, managing illiquidity risk remains a critical element of portfolio construction.
Public equity markets have gradually evolved from being the primary source of growth financing for corporations to being an income-bearing asset for investors and an acquisition currency for corporations. Looking ahead, we expect over 80% of returns in developed public equity markets over the next 10 years to come from dividends and buybacks, compared with less than half over the last 25 years.
The infographic below uses illustrations to convey the main talking points and areas of interest covered in the article.
1. Over the past 50 years, the roles of public and private capital markets have changed slowly but profoundly.
2. and 3. Private and public asset investments
4. As economic cycles mature, avoiding uncompensated public market illiquidity becomes a pressing concern for any investor in public and private assets.
5. Actively planning for illiquidity risk in both public and private assets will help multi-asset investors build stronger portfolios through the cycle.
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J.P. Morgan Asset Management's Long-Term Capital Market Assumptions draws on the best thinking of our experienced investment professionals worldwide.