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Public to Private Equity in the United States: A Long-Term Look CONSILIENT OBSERVER | September 1, 2026

Large institutional investors, including pension funds and Michael J. Mauboussin endowments, have shifted their allocations in U.S. equities from public to private markets over the past 40 years. This change has Dan Callahan, CFA had reverberations for investors, executives, policymakers, and asset managers of public and private equity. For public equity, we include all of the stocks of companies that trade on an exchange in the U.S. The S&P 500, an index that tracks the stocks of 500 large companies in the U.S. and represents about 80 percent of the total market, had a solid 11.5 percent compound annual growth rate (CAGR) for the 40 years ended 2025. Still, there are today about one-half as many public companies as there were in 1996. For private equity, we include buyouts and venture capital (VC). We examine long-term trends in each of these markets, including their size, patterns of how they have bought and sold businesses, and return on investment. This report is an update of one from August 2020, and a lot has changed in the ensuing half dozen years. Most notably, the period of “easy money,” which started in 2009 when the Federal Reserve and other central banks lowered policy rates to essentially zero in the wake of the Great Recession, ended in 2021. As a result, the real yield on the 10-year U.S. Treasury note went from about -1.0 percent in late 2021 to roughly 2.4 percent in August 2026. There have also been regulatory and business initiatives aimed at making investing in private equity more accessible to individual investors. Institutional investors have been the primary source of capital for this asset class, but a majority of surveyed money managers now expect that at least one-half of flows into private markets will come through investments targeted at individuals within the next couple of years.1

Private equity funds typically have lives of about 10 years and extension options. In rough terms, the managers of these funds use the first five years to enter investments and the second five years to exit them and return capital to the limited partners. In recent years, exits as a percentage of assets under management have been below historical averages, forcing private equity managers to take creative measures to provide liquidity to their investors.2 This effect has been compounded by the fact that access to capital has made it easier for companies to remain private for longer periods than they did in the past. 3

From the end of World War II through the early 1970s, many companies went public to raise capital to fund their growth. For instance, the number of public companies grew roughly fivefold from 1946 to 1976, as many 4 companies needed to finance “their mass pr oduction and mass distribution.”

Until the recent boom in generative artificial intelligence (GenAI), young companies generally relied more on intangible assets and had a less voracious appetite for capital. Further, the growing private market provided sufficient money to expand and offer liquidity to employees and some investors.

The rise of GenAI has changed this. Companies competing in this industry are spending huge sums to create supply that meets demand. Large public companies such as Microsoft, Amazon, and Alphabet have seen their free cash flow drop substantially as profit increases have been more than offset by a massive surge in capital expenditures.

Young companies in the GenAI industry, including OpenAI, Anthropic, and xAI, a division of SpaceX, have had rapid sales growth but substantial negative free cash flow. They must raise capital to fund operations and pay employees.

Equity capital raised through U.S. initial public offerings (IPOs) in the first half of 2026 alone would rank among the highest full-year totals in decades.

Stepping back, we can point to a few drivers of the move from public to private equity. First, sophisticated investors, including pension funds and endowments, have shifted their asset allocation toward private markets in recent decades. The motivations include attractive prospective investment returns and the benefit…