Private investments: the world’s second-largest economy

Investing.com -- Private markets have expanded so rapidly that, if measured as a single economy, they would now rank as the world’s second largest, according to Bank of America (BofA).

Total private capital assets under management reached $22 trillion in 2024, more than double the 2012 level and up nearly twentyfold since 2000. BofA projects that private equity, private debt, and infrastructure AUM could continue to grow at annual rates of at least 11% through 2028.

The growth reflects a structural shift in global finance. The number of U.S.-listed companies has halved over the past two decades to about 4,000, while the number of private, venture-backed firms has jumped twenty-fivefold.

Startups are staying private for longer—an average of sixteen years before going public, one-third longer than a decade ago. Over the last 25 years, private markets in the U.S. have grown roughly 35 times in size, compared with a fourfold increase in public markets. Their share of total U.S. equity has climbed from 1% in 2000 to 8% in 2025.

Private markets have also proven more stable than their public counterparts. Fundraising activity has been far less volatile, insulating investors from the sharp swings tied to macro events that typically roil public equities.

BofA notes that almost $10 trillion in private equity capital has been raised since 2012, underscoring a steady inflow of long-term commitments.

Private markets have consistently outperformed public ones. “Over a 10-year time horizon, private equity has outperformed the S&P 500 by 6pp every year on average,” the report said, with similar outperformance over longer periods.

Investors are drawn by higher returns and greater control, while companies benefit from avoiding the regulatory costs of public listings, which BofA estimates consume about 4% of a median U.S. company’s market capitalization.

Beyond cost and compliance, firms remain private to preserve flexibility. BofA highlights that privacy, entrepreneurship, and control are key motivations—companies can shield financial data from competitors and avoid quarterly earnings pressure, allowing them to focus on R&D and long-term strategy.

Access to private investments is widening as regulators and asset managers introduce new vehicles to reach retail investors. Evergreen and feeder funds, as well as policy changes such as the Trump administration’s 2025 order expanding alternative investments in 401(k) plans, are opening the sector beyond institutions and family offices.

The Monetary Authority of Singapore has proposed a Long-Term Investment Fund framework, and U.K. pension providers have pledged to allocate 10% of portfolios to alternatives by 2030.

Retail alternative-assets under management are expected to grow at a 12% compound rate through 2032, "as investors seek diversification/low correlation to public equities and higher long-term returns," BofA said. This implies faster growth than the broader alternatives market.

The bank also highlights the “tech arms race” driving dependence on private innovation. “The AI revolution sparked by OpenAI’s ChatGPT is a prime example. The access to technology is crucial for growth and the public market is racing to own it,” it wrote.

Giants such as Nvidia, Google, Microsoft, and Amazon have invested in roughly half of all AI unicorns since ChatGPT’s debut.

BofA’s research also points to the influence of private companies on global innovation. Firms such as OpenAI, SpaceX, Stripe, and Anthropic have achieved valuations that rival large public peers, together forming what the bank calls the “Private Magnificent Seven.”

The 120 largest thematic unicorns carry a combined valuation of about $3 trillion—comparable to the market capitalization of Germany.