Use three Guide to Alternatives slides to support client conversations on the opportunities in private equity.
More companies are staying private for longer
The number of companies going public has steadily declined, and many companies are staying private for longer. Those companies often experience healthy growth before they reach the public markets, going public at a more mature stage. Private markets offer access to a broader array of opportunities not found in the public market and the ability to invest in a company as — not after — it flourishes. The opportunity set is vast: 85% of U.S. companies with annual revenue over $100 million remain private.1 In addition, private equity managers help young companies grow organically by making operational and strategic improvements.
Exhibit 1: Number of listed U.S. companies and market cap
Number, S&P 500 market capitalization in USD trillions
Exhibit 1 source: World Federation of Exchanges, J.P. Morgan Asset Management. Number of listed U.S. companies is represented by the sum of number of companies listed on the NYSE and the NASDAQ. 1 S&P Capital IQ as of August 31, 2022. Data are based on availability as of February 28, 2025. Guide to Alternatives, page 50.
Finding growth has become more challenging
Investors looking for long-term growth in public markets are likely heavily concentrated in large cap technology stocks, which are unlikely to repeat their robust growth rates of the past decade or are confronted with lofty valuations. Private equity offers access to smaller companies with growth potential, while small cap stocks, often a public proxy for private equity, tend to be more exposed to cyclical, value-oriented sectors that could be more vulnerable in an economic downturn.
Exhibit 2: Private vs. public equity sector weights
Exhibit 2 source: Cambridge Associates, Russell, J.P. Morgan Asset Management. *Other includes real estate, utilities and energy. Sector weights are as of December 31, 2023. Data are based on availability as of February 28, 2025. Guide to Alternatives, page 50.
A resilient economy and profits have supported valuations
In 2022, public market valuations reset dramatically; the same was projected for private markets in 2023. However, private equity valuations held up reasonably well as the economy and earnings were resilient. Looking ahead, the economy is likely to slow, and recession risk is not off the table, but the best private equity vintages for long-term returns tend to be initiated during periods of economic uncertainty.
Exhibit 3: U.S. LBOs: purchase price multiples
Equity and debt over trailing EBITDA
Exhibit 3 source: LCD, PitchBook, J.P. Morgan Asset Management. Purchase price multiples are as of December 31, 2023. Data are based on availability as on February 28, 2025. Guide to Alternatives, page 57.