The door into private markets is swinging open for retail investors as public markets shrink

The traditional stock market is losing its status as an economic mirror. This transformation is not a reflection of declining value, as indices continue to reach record highs, but a narrowing of breadth and opportunity.

For the South African investor, the era of stock picking or relying on a standard balanced portfolio is ending because the companies driving the real economy choose to remain unlisted for longer.

According to data presented by investment firm Cogence in partnership with global asset manager BlackRock, publicly listed companies now account for only 12% of global companies, with revenue exceeding $100-million. This suggests that the traditional 60/40 portfolio – comprising 60% equities and 40% bonds – is losing its effectiveness.

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“We’ve seen that there is a shrinking market in terms of publicly available listed companies,” said Liam Davis, chief investment officer for wealth solutions at BlackRock. He noted that while these companies remain important, the reality is that “listed companies do make up a relatively small proportion of the overall economic landscape. So we need to recognise that there are other opportunities to invest in [diversified markets] portfolios.”

The maturity crisis

The primary issue for the average investor has moved towards a question of timing and access. In previous decades, high-growth companies listed early, allowing the public to participate in their exponential rise. Today, companies stay private for much longer, fencing off their highest growth years for institutional investors and venture capitalists.

Data from the BlackRock Investment Institute indicates that the average age of a company at its Initial Public Offering (IPO) has nearly doubled, rising from eight years in 2004 to 14 years in 2024.

Benjamin Alt, Schroders’ head of Global Private Equity Portfolios, suggested that big isn’t always better when searching for value in this shrinking public universe.

He noted that in the US alone, “87% of companies valued at over $100-million are private”. As delistings continue, Alt said that a “universe of overlooked, high quality, founder-led businesses emerges”, particularly in the small- to mid-market buyout range where innovation is most concentrated.

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According to Cogence’s analysis, private markets now account for 14% of global GDP and are projected to grow by nearly 50% by 2029.

“Companies are staying private for longer, which sort of helps explain why we’re seeing a relatively narrower opportunity set in the public space, but a really growing and exciting opportunity set within the private space. And it’s something which we can’t ignore,” Davis said.

Funding the machine

This migration is being accelerated by the massive capital requirements of Mega Forces, specifically the artificial intelligence revolution and the low-carbon energy transition.

The physical buildout phase – the construction of data centres and power grids – creates a “financing hump” requiring massive leverage that is increasingly funded through private credit and infrastructure markets, according to the Cogence Market Outlook 2026, which notes that these capital-intensive projects often bypass traditional banks in favour of private lending solutions.

To access the picks and shovels of this revolution, investors can look to private infrastructure. Davis highlighted hyperscalers as a prime example of assets that sit largely outside public reach.

“Hyperscalers is the one which I think we often hear,” Davis said. “These are the data centres that are needed to really continue to support the expansion of AI investments. CapEx intensity is increasing. All of this talks to infrastructure.”

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Alt noted that a “surprising number” of small- to mid-cap companies in the $50-million to $100-million range still lack modern enterprise resource planning (ERP) systems and basic digital infrastructure. This provides a “transformational element” where private equity can drive value through simple digital upgrades.

The end of the ‘Great Moderation’

The pivot toward private markets is also a defensive move. Previously, investors relied on the “Great Moderation”, a period of stable inflation where stocks went down and bonds usually went up, protecting the portfolio.

That safety net has evaporated as bonds and equities now frequently move in tandem. Davis explained that the financial world had exited this period of benign market conditions that existed from the Global Financial Crisis until the Covid-19 pandemic.

“The market was relatively benign, rates were relatively low. You didn’t have to do too many things. Now we find that actually, there’s more volatility in the market,” Davis said. He argued that “leaning into additional diverse markets, such as private markets, can potentially provide that resilience and robustness within the portfolio”.

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He warned that the traditional relationship between asset classes had become “erratic”, meaning government bonds had become a “less reliable cushion against equity selloffs”. In this new regime, private markets act as a necessary ballast, offering returns that are linked to different risk factors than the daily noise of the stock market.

What this transition means for your personal investment strategy

💸 You can own stakes in massive global companies, from AI data centres in the US to European medical tech, that don’t list on the JSE.
💸 Many local investors are heavily exposed to a few large mining or retail stocks; private markets allow you to diversify away from these risks.
💸 In exchange for higher potential growth, a portion of your money may be inaccessible for a period of time.
💸 Private assets don’t tick up or down every second on a screen, which can help smooth out the emotional rollercoaster of watching your portfolio value.
💸 Historically, these deals required millions of rand to join; new structures through platforms like Discovery allow investors of all sizes to participate.

A liquidity trade-off

This is the structural reality underpinning the launch of the new Cogence Diversified Markets portfolios. While the headline news is that Discovery’s discretionary fund manager is extending private market access to retail investors, one needs to look at why this move has become a defensive necessity rather than a luxury.

Enabled by a partnership with BlackRock, these portfolios target a 15% allocation to unlisted assets, including private equity, private credit, infrastructure and real estate, to capture the growing share of global value creation occurring outside public stock exchanges.

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Due to current regulatory constraints in SA, these portfolios are exclusively available through the Discovery Local Endowment structure, utilising European Long-Term Investment Fund 2.0 mechanisms to manage liquidity while targeting returns of over 10% per year in euros for the private allocation.

“We know traditionally the locking time for private markets is five to seven years, but with the new structures that came into effect in the UK, the 15% has now got a two-year liquidity constraint,” said Cogence CEO Jonel Matthee-Ferreira. She added that the partnership with BlackRock made the offering “quite unique” in the retail space.

“Both public and private equity investors are owners of companies,” Alt said. “Private equity, however, is illiquid by nature. Investors are in the deal for longer and cannot simply trade in and out or adjust overnight. For this reason, private equity investors must develop a view that is more mid to long term.”

Davis was equally blunt about the trade-offs involved in chasing private returns.

“Private markets can provide some exciting upside. It does have its own risk: it’s not fully liquid. So there is an illiquidity to consider. You can’t get all of your money back straight away like you can with public assets,” he said.

The launch of Cogence’s portfolios suggests a broader concession by the financial industry. It is an admission that the public markets, once the great democratiser of wealth, are no longer sufficient on their own.

The party has moved, and staying exclusively in the public market means waiting outside while the real value is created behind closed doors. DM