The landscape for public and private markets has changed significantly over the past 10 years, with a marked shift in capital allocation to the private arena.

This evolution is being driven by regulations, new technology and the availability of financing alternatives. Other key drivers are the accommodative monetary policies following the financial crisis in 2007-2008 and more recently, the inflow of significant investment capital from sovereign wealth funds.

US listed markets have seen multiple waves of structural change over the last decade with increased application of index trading, exchange traded funds [ETFs], high-frequency trading and factor investing.

Mergers and Acquisitions [M & A] have soared while US initial public offerings [IPOs] have fallen by 75% resulting in a reducing replenishment of listed companies. In fact, the number of US listed companies has fallen by 40%, from 7,000 in 1996 to just over 4,000 in 2018.

The increasing regulatory and compliance burdens coupled with the availability of more capital in private markets has discouraged companies from going public.

Businesses are staying private for longer thus reducing the option for investment in public companies.

Public markets now contain a big concentration of high-value companies with increased market capitalisation, tending to be more-mature, larger and potentially slower growing entities.

Private companies tend to be younger and more dynamic; growing strongly in terms of product innovation, sales, employment and profitability.

From 1998 to 2017, employment in US private companies grew by 60% whereas all other US companies increased jobs by 24%.

Future access to public markets may be mainly by index-tracking funds.

Active managers are switching their attention to private companies in which to use their research and stock-picking expertise to identify future growth opportunities.

Private companies are likely to continue to offer above average growth opportunities but despite the growth of secondary markets, private markets remain largely illiquid.

Public market only investors are likely to be unable to participate in the rapid growth and high equity appreciation phase of companies and we are likely to see secondary markets being used as a bona fide portfolio management tool.