On 14 March 2025, the Future Fund and FCLTGlobal gathered with executives representing Australian asset owners, asset managers, and companies to discuss the dynamics between public and private markets.

The discussion on private versus public markets has gained momentum, prompting questions about whether the changes we have seen are structural or merely cyclical in nature. However, before we can answer that question, it is essential to understand these changes and how we arrived at this point.

At the forum, certain Australian investors noted that three developments have impacted the behavior of issuers, investors, and banks:

• The Global Financial Crisis has had an impact on the oversight and the changing business model of banks. Banks increasingly behave as intermediaries rather than holders of risk. However, it is not just the banks that face increased oversight, as regulations to protect the integrity of financial markets have also strengthened.
• Interest rates have continuously declined over the last two decades. For issuers, this has led to significantly lower costs of capital, which has translated into wider profit margins. In some cases, financial leverage has also increased because the higher interest rate coverage allowed more debt financing. For investors, the decline in interest rates was beneficial in terms of valuing existing assets, but it has presented challenges for new investments.
• The assets under management worldwide have grown significantly. This is true for traditional pension plans and superannuation funds, as well as for sovereign wealth funds and high-net-worth individuals.

It is against this backdrop that the group felt the discussion between public and private markets must be held. The two markets offer unique features:

• Public markets are considered efficient in terms of price discovery and liquidity, whilst private markets are considered opaque and less liquid.
• Public markets are regulated, partly to protect retail investors. In contrast, private markets are less regulated, as they are currently restricted to institutional and qualified investors (although barriers to mainstream retail investors are decreasing).
• Public markets are standardized and consist of fixed income and stocks. Private markets offer tailored solutions and comprise a diverse range of assets, including private equity, venture capital, private debt, real estate, infrastructure, and natural resources.

Given this context, what then triggers the current discussion? The gathering agreed with the broad observation that the number of listings on public markets is trending downward and that corporates are less inclined to pursue an IPO, in part due to the increasing administrative burdens placed on listed companies. At the same time, Australian investors also noted that the size of private markets continues to grow, and funding requirements can easily be met due to the growth in assets.

Some of the Australian investors present expressed concerns about the volatility in public markets and the fact that strong performance is dominated by a limited number of stocks. Private markets, by comparison, offer ample investment opportunities and ways to diversify their portfolio risk, as well as reduced volatility. While liquidity, in terms of the ability to trade positions, is limited in private markets, this is less of a problem for long-term investors.

So, is this development in public versus private markets structural or cyclical?

The discussion centered on valuations as one of the primary drivers of the disconnect between public and private markets, highlighting the distinct approaches required to determine a price for any given asset in each market. Some investors present were critical of the current valuation practices employed within private markets, noting that price discovery is significantly different between the two markets, largely due to the lack of transparency in private markets. In some opinions, what remains consistent between the two markets is the value of a company being determined by all the decisions made by management, owners, and boards.

The group believed that many expected characteristics of today’s public and private markets can be defined cyclically:

• One expected cyclical swing factor is the interest rate. Should interest rates and yield curves return to a higher level, a reversal in asset allocation is expected, with allocations to fixed income and more liquid public markets anticipated to increase. With such a move, corporate behavior will also change as they “follow the money.”

Members of the group also noted that some structural factors are, however, expected to continue:

• Institutional investors will continue to invest in private markets simply because it enlarges their investible universe. Certain members believed that private markets provide enhanced opportunities for active management and offer opportunities for greater diversification. A clear example is the private debt market, which is a relatively new asset class for investors as banks are stepping away from a traditional role as lenders. It is also true for corporates: it is not an “either-or” decision.
• Corporates continue to have good reasons to be listed on the public market besides funding costs (e.g., branding purposes). There are, however, good reasons to turn to the private markets, for example, less pressure to pay out dividends when pursuing a growth strategy, as well as a reduction in administrative burdens.

As such, public and private markets can easily co-exist, offering opportunities for investors and issuers alike.

Looking forward, to what extent will the two markets remain complementary or overlap due to future developments? The gathering explored whether three developments might lead to an overlapping situation:

• Technological developments will lead to more information efficiency in private markets and, combined with better trading platforms (for example, by means of tokenization), will make public and private markets more alike in terms of price discovery and valuations of assets.
• Providing retail investors with access to private markets is expected to have two consequences. The dynamics of the private markets could change, potentially becoming more short-term oriented. Another consequence is that more regulations are likely, as regulators seek to protect an increasing number of retail investors.
• Private markets can become the focus of national governments to boost their domestic development plans.

While much is believed about the evolving dynamics between public and private markets, several big questions remain:

• How will markets continue to evolve as retail investors increasingly have access to private markets? As more retail capital is available, there are implications for liquidity and price discovery. Questions are likely to arise regarding the fiduciary duty of asset managers to their investors and the definition of an accredited investor.
• What will happen in the regulatory environment in each market, and what will the implications be in terms of relative attractiveness?

This issue is also top of mind for regulatory bodies around the world. In the Australian context, Australia’s markets and financial services regulator, ASIC, has released a discussion paper on the dynamics between the public and private markets and is seeking industry insights on the opportunities and risks emerging from the shifts between these two markets. ASIC has stated how both markets are critical for the Australian economy.

In February 2025, acting SEC Chair Mark Uyeda endorsed the view of private markets that investors can assess risks for themselves and that SEC regulations should not have the effect of depriving investors of the opportunity to accumulate wealth and diversify their portfolios through investments in private companies and private funds, and of public markets that IPOs need to be made more attractive. And in 2024, ESMA published 20 recommendations to build more effective and attractive capital markets, among them recommendations related to institutional and retail private capital.

How will geopolitics change the landscape for fundraising, investing, and economic growth? As geopolitics evolve and domestic markets strive to remain or become competitive destinations for long-term capital, capital will be sourced from wherever it is most cost-effective.

For additional reading:

From FCLTGlobal:

• Beyond the Blame Game: Why the Proxy System Needs to Change
• Coke Or Pepsi? Most Of Coke’s Shareholders Don’t Care
• Public Markets for the Long Term: How Successful Listed Companies Thrive
• The Silver Lining of the New Rate Environment: The Durability of the Public Markets
• Direct Value Creation and Capture in the Pension Fund Industry: Five Examples
• It’s Not Enough to Be ‘Active Owners’ or Simply ‘Engage’ With Public Companies

From Future Fund:

• The Death of Traditional Portfolio Construction?