PRIVATE MARKETS
Bridging the gap in public and private market data
Private markets have grown tremendously in the last decade, but despite this growth, there are challenges, including higher management fees and liquidity mismatches, which can impact returns and investor experience. In this article, we share how Morningstar is working to help bridge this gap.
The shift from public to private equity markets has changed the landscape of investment opportunity. Private companies are staying private for longer, while the number of public companies has shrunk. Investor portfolios reflect the changing landscape. According to Nuveen’s EQuilibrium 2025 Global Institutional Investor Survey, 92% of investors globally now hold both private equity and private credit, compared to 45% in 20211.
Rapid advancements in technology have also disrupted traditional industries and created new opportunities for innovative businesses in areas such as artificial intelligence, cybersecurity, and healthcare technology. This shift away from the traditional industrial-based model toward an “innovation economy” has fueled a surge in entrepreneurship and startup activity, and venture capital has helped power this dramatic growth.
It’s vital that investors of all types – including asset managers, institutional owners, and high-net worth advisers – see a complete picture of the market that captures modern realities. To do so, they will need to overcome these challenges:
- Asset owners and advisers need to understand risk and return at the portfolio level, and tomorrow’s portfolio is a public-private hybrid. However, risk and return analysis that would be routine for public market assets can be challenging and operationally complex in the private markets, where companies and funds are not subject to regulatory disclosure requirements.
- They also need private market data that supports integrated views across public and private investments.
- Private companies are not traded daily, and the infrequent valuations and lack of available daily pricing information make it difficult for advisers to precisely the rewards and risks in client portfolios that come from allocations to private markets.
Building better private market data has to be an industry-wide endeavour. Below, we’ve shared a broad roadmap of everything that will go into this and the role Morningstar is playing in bringing about this change.
1. Security IDs
Currently, there is no standard security identifier for private securities. Establishing one would make the security identifiable, facilitating the trading, settlement and clearing of the security if it's going to be transacted, even in private markets.
2. Reference Data
Traditional industry groups, like the Morningstar Global Equity Classification System (GECS) that are used to classify public companies, still largely reflect the foundations of the industrial economy. However, as the global economy continues to evolve, investors can gain valuable insights into the drivers of future economic growth by utilising an industry classification system that mirrors the real-world economic ecosystem.
For example, PitchBook's industry verticals provide a taxonomy for discovering innovative companies exposed to similar growth drivers. Managed by PitchBook’s emerging technology analysts, the classification framework groups companies that focus on a shared niche or specialised market spanning multiple industries.
Vertical classifications are determined in several ways, including the observance of venture capital flows and/or the emergence of startups pursuing similar high-growth business opportunities and innovative technologies. Because the industry verticals are not mutually exclusive, companies can be categorised into multiple verticals.
For verticals achieving the highest deal values, PitchBook’s in-house industry specialists validate companies’ inclusion based on proprietary research, industry-acknowledged ecosystem maps, product documentation, customer use cases, and investment themes. This process results in comprehensive categorisation of public and private companies in analyst-curated verticals offering the most promise for long-term growth.
3. Evaluated prices
Private companies are difficult to value because quality data is scarce. Investors rely on third-party valuation techniques, which suffer from a lack of timely data or the subjectivity of human inputs.
Morningstar and PitchBook’s proprietary mark-to-model index attempts to close the valuation gap by creating a methodologically sound, consistent way to evaluate the performance of late-stage, venture-capital-backed private companies that have reached a post-money valuation of US$1 billion.
It includes three factors:
- Past deals factor: price data from the subject company’s prior funding rounds.
- comparable factor: price data from VC deals involving privately-owned companies that are similar to the subject company.
- Public comparable factor: price data from a Morningstar Thematic Index representing the performance of a global public market industry we have mapped the subject company to.
4. Private funds data
Asset owners and advisers want to be able to run aggregate risk and return analysis across both public and private portfolio holdings. Returns data for private-equity and venture-capital funds are generally available on a quarterly basis, meaning that at any point in time, returns data is at best from the prior quarter. (In practice, lag times can be longer, reflecting the pricing and data collection process: net asset values are established through third-party valuations and are collected from both fund managers and their institutional investors.)
PitchBook publishes private funds returns data, as well as operational and reference data such as the fund’s contact details, investors, information on past deals, strategy, and industry, sector or geographical investment preferences. We have now made available in Morningstar Direct a new universe comprised of limited partnership funds, including private equity, venture capital, private real estate, private debt, real asset, infrastructure, secondaries, and co-investment funds.
5. Benchmarks
Indexes help investors understand market structure and risks, benchmark investments, and make asset-allocation policy decisions. Better benchmarks would bring greater efficiencies to private market investing and provide investors with the consistent, comparable information they need to make informed investment decisions.
Following explosive growth in the past decade, there are more than 1,300 unicorns — late-stage venture-backed companies with valuations of over US$1 billion — worldwide, representing US$4.5 trillion in aggregate market value.
The Morningstar PitchBook Global Unicorn Indexes, which are accessible through Morningstar Direct, provide daily valuation estimates for unicorns using a proprietary model that incorporates prices for private startups and comparable public companies.
Bridging Public and Private Market Data
At Morningstar and PitchBook, our mission is to empower investor success. We have expanded the work we do to improve public-market data availability, transparency and comparability to the private markets as well.
Morningstar Direct combines deep public market coverage with advanced portfolio analysis capabilities. By integrating select data from PitchBook’s private capital fund universe, users can effortlessly build portfolios that blend private and public investments. Equipped with a powerful suite of analytical tools, they gain valuable insights into potential risk and return trade-offs, enabling a more comprehensive understanding of portfolio dynamics.
__________References:
1: EQuilibrium Global Institutional Investor Survey 2025