Why a lack of private market data exposes investors to more risk
May 28, 2019
The private markets have developed rapidly over the last decade—and 2018 may have been the clearest picture yet of this unprecedented maturation.
Not only has the number of US private equity-backed companies nearly doubled over the last decade, but private equity’s net asset value has grown more than sevenfold since 2002. This explosive growth, according to the McKinsey Global Institute, has even persuaded investors who previously shied away from the private markets to adapt their allocation strategy accordingly.
The rapid development of the industry has permeated nearly every facet of the market, ushering in new complexities and challenges. To keep up, the modern firm has to invest in an operational approach that systematically tracks what’s happening across the entire landscape, public and private.
But, gathering that information is easier said than done when it comes to private companies, which aren’t known for financial transparency (or which report unverified, potentially biased financials). Despite the challenges, overlooking private market data can create a detrimental blind spot for investors. And though public market information is readily available, it doesn’t provide the comprehensive view that investors need to make formed decisions.
In fact, without appropriate data to inform private market investment decisions, investors are exposed to more risks and subject themselves to underserving their clients. For this market brief, we’ll focus on three risks associated with a lack of private market information and why it’s important for firms to augment their operational approach to evolve alongside the industry.
Download the brief to see how overlooking private market data leaves a blind spot when calculating valuations, sourcing deals and tracking market trends.