Where Public Meets Private: Accessing Private Markets

Industry Insights From Morningstar® Indexes Where Public Meets Private:

Accessing Private Markets Through Listed Equities

2 Where Public Meets Private: Accessing Private Markets Through Listed Equities

Executive Summary

Equity markets have changed profoundly in recent decades. Think back to the IPO frenzy of the late

1990s, when companies listed their shares with little more than a dot-com suffix and a business

model built on “eyeballs.” Twenty years later, companies worth billions avoid going public, while

firms like Blackstone, Apollo, and 3i have taken scores of companies into private hands. Twice as

many U.S. companies are now backed by private equity than are publicly listed.

As markets have evolved, so too has investor behavior. Pension funds, sovereign wealth funds,

and other asset owners are raising their allocations to private assets. Several hundred U.S. mutual

funds even own small stakes in private companies.1 Meanwhile, managers long associated with

public markets—names like Vanguard, BlackRock, Amundi, Fidelity, and T. Rowe Price—are launch-

ing investment vehicles dedicated to private companies, while the SEC chairman talks about

making private markets more accessible.

The convergence between public- and private-market investing only shows signs of accelerating,

according to PitchBook, a Morningstar company specializing in private-market data and research.

A PitchBook survey of institutional investors showed that 66% plan to increase their allocations

to private assets. Expanding the investment opportunity set holds obvious appeal. So too do eye-

popping returns for the top-performing private equity and venture capital funds.

Private-market investing has its challenges, though. Direct investments in private companies and in

private equity funds require large outlays, long lockup periods, and concentrated exposure to illiquid,

often leveraged investments. Private equity fund fees are notoriously high.

Publicly traded vehicles that invest in privately held businesses are an attractive gateway to private

markets. They are liquid, regulated, diversified, and easily investable. They help investors avoid

post-commitment declines typical of private equity investments. Listed private equity provides an

access point to the asset class for retail investors as well as institutions.

As private markets grow, investors need to expand their toolkits. The Morningstar PitchBook Listed

Private Equity Indexes highlight publicly traded companies with significant private equity exposure.

The indexes allow investors to better reflect new market dynamics in their portfolios.

1 “Unicorn Hunting: Large-Cap Funds That Dabble in Private Companies.” Morningstar Manager Research. May 2018. Katie Reichart.

Dan Lefkovitz Strategist, Morningstar Indexes

Rahul Handoo Senior Quantitative Analyst, New Product Development

Daniel Cook, CFA Senior Analysis Manager, PitchBook

Krishnan V.R., CFA Quantitative Research Manager, New Product Development


Private Markets Rising

The growth of private markets is one of the key forces shaping today’s investment landscape. Many

young companies are choosing to remain private or delaying bringing their shares to market

far longer than in the past, all thanks to massive cash infusions from investors. Prominent examples

include Ant Financial (the former Alipay), Airbnb, Didi Chuxing, and Stripe, all of which remained

private as of this writing. U.S. ride-hailing services Uber and Lyft, as well as Cloudera, Pinterest,

Snapchat, and Dropbox, all brought their shares to market in 2017-19 but reached significant scale

before their IPOs. Private companies with valuations exceeding $1 billion may be called “unicorns,”

but they’re no longer as rare as the term implies—PitchBook counted no fewer than 375 as

of December 2019.

Meanwhile, many sizable public companies have been taken private in recent years. Alliance Boots,

Equity Office Properties, Burger King, Barnes and Noble, Heinz, Panera Bread, Hilton Worldwide,

Dell, and Kinder Morgan are all examples of public companies that were delisted (though some have

relisted). The players taking them private include names like Blackstone, Kohlberg Kravis Roberts,

3G Capital, and the Carlyle Group. These private equity investors are professionally managed partner-

ships that acquire or build stakes, typically in more mature companies. Targeted companies often

take on significant amounts of debt.

By sheer numbers alone, U.S. companies backed by private equity eclipsed publicly listed ones more

than a decade ago.

Exhibit 1. Public vs. Private Equity-Backed Companies in the U.S.

12,000

10,000

8,000

6,000

2,000

4,000

0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

U.S. Private Equity-Backed Companies U.S. Public Companies

Source: PitchBook and World Bank

The trend is not confined to the U.S. market. The number of companies listed on the main United

Kingdom exchanges, for example, has declined by more than 70% since the mid-1960s. This can be

attributed to both a decrease in IPOs and an increase in companies being taken private.2

By value, public markets are still multiples larger than private ones. But private-market investing is

growing faster. Between 2008 and 2019, PE and VC investors deployed $11.6 trillion into companies

globally, according to PitchBook data. In 2019, private equity funds raised more than $300 billion,

an all-time high.

2 “What Is the Point of the Equity Market?” November 2019. Schroders.


Exhibit 2. Global PE & VC deal value ($B)

$2,000

1,600

1,200

800

400

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20192018

Private Equity Funds Value Venture Capital Funds Value

Source: PitchBook

Public markets remain key to unlocking private-company value. Between 2009 and 2018, PitchBook

counted 1,068 initial public offerings of venture-capital-backed firms in the U.S. and Europe.

Meanwhile, 1,005 companies backed by private equity went public. To be sure, there have been

some high-profile duds, like Uber and WeWork. But there are successful counterexamples,

such as cloud-based platform Smartsheet (a unicorn) and Arvinas, a biopharmaceutical company.

Prominent private equity “exits” through IPOs have included Glencore International, which listed

in 2011 on the London Stock Exchange, and HCA, also in 2011. PitchBook tracks several companies

that have IPO’ed twice with the involvement of private equity. The list includes Townsquare

Media and Jack in the Box in the U.S., Debenhams and DFS Furniture in the U.K., Samsonite in Hong

Kong, Parques Reunidos in Spain, Legrand in France, and APAC Realty in Singapore. Clearly,

the public-private thoroughfare accommodates two-way traffic.

PitchBook has also observed that private equity holding times are lengthening. Thanks to the

prolonged bull market for equities, the general partners who run private equity funds are retaining

ownership of portfolio companies, even extending fund lives.3 A robust secondary market for

partnership stakes has blossomed, as well.

Drivers of Private Market Growth

A variety of forces have conspired to shift the balance of power between public and private markets.

Low interest rates since the financial crisis have eased the raising of private capital, reduced the cost

of corporate borrowing, and pushed institutional investors out of low-yielding bonds. Costs of listing

are frequently cited as prohibitive. These include underwriting fees, listing fees, and ongoing

reporting and compliance expenses. The OECD Business and Finance Outlook of 2017 estimated

median IPO costs as between 9% and 11% of the amount raised in the U.S. market.4

PitchBook

PitchBook is a financial data and software company founded in 2007 with a focus on private capital markets. Morningstar acquired PitchBook in December 2016. As of 2019, the PitchBook platform captured data on 1.9 million companies, 1.1 million deals, and 46,000 funds (private equity, venture capital, and so on). PitchBook’s data teams collect, calculate, and verify key figures to build in-depth data sets with information not found elsewhere. More than 650,000 web crawlers scan the Internet—capturing relevant financial information from news articles, regulatory filings, websites, press releases, and more. PitchBook data is used for many purposes, including sourcing investments, fundraising, and deal execution.

3 Cox, D., Fernyhough, W., Stephen-George, D., and Carmean, Z., 2020 Private Equity Outlook. PitchBook. Dec 13, 2019.

4 What is the point of the equity market?” November 2019. Schroders.


U.S. government policy has also boosted private markets at the expense of public ones. A September

2019 study by the National Bureau of Economic Research cited a number of regulatory developments

that “played a significant role in changing the going-public versus staying-private trade off.” One was

the National Securities Markets Improvement Act of 1996, which allowed for an increased number

of investors in private funds.5 Another was the 2012 Jobs Act, which expanded the number of private

shareholders a company is allowed before being required to publicize financial results.

The simple fact is that private companies can operate out of the limelight. They are not obliged to

reveal details, including financial results or business strategy, that could benefit competitors.

They face a lower regulatory burden and fewer reporting requirements than their public counterparts.

Public companies today are under enormous scrutiny. They face pressure to deliver quarterly

earnings and can suffer painful consequences for falling short, including share price declines and

interference from activist investors. Private companies, by contrast, aren’t beholden to the

short-term interests of public shareholders. They can focus on long-term strategy and value creation.

A Canadian airline and travel company, WestJet was taken private in 2019 by Toronto-based

private equity company Onex in a deal worth CAD 50 billion. WestJet shareholders received CAD 31

per share and the company was delisted from the Toronto Stock Exchange. WestJet services over

100 destinations as a budget carrier and generated CAD 4.7 billion in revenue in 2018. But WestJet

is pivoting its strategy. It has purchased wide-body jets and plans to serve more-affluent travelers,

while running an ultra-low-cost carrier branded Swoop. Morningstar Equity Research wrote

of the transaction:

“We think private markets are a great landing spot for WestJet’s assets, since public markets are

uneasy about commodity volatility, a stalling upcycle, and management’s operational

transformation. The private market is able to weather these near-term headwinds and give WestJet

space to execute on a myriad of initiatives geared toward attracting premium travelers and

fleet optimization.” 6

Private equity owners often take an active approach, sitting on the board of portfolio companies and

getting involved in day-to-day operations to drive value, even changing management if need be.

An increasingly popular strategy is called “Buy and Build,” also known as “Add-On Deals,” wherein

private equity uses an acquired company as a platform for further related acquisitions. Another

trend has seen private equity players carving out pieces of larger companies and taking them private.

The largest U.S. buyout of 2019 was the $13.2 billion Clarios carve-out from Johnson Controls, while

in Europe, data provider Refinitiv was carved out of Thomson Reuters by private equity, then sold

to London Stock Exchange. Private equity funds typically make significant use of leverage, issuing

debt or restructuring existing debt to enhance returns.

5 Ewens, Michael and Farre-Mensa, Joan, The Deregulation of the Private Equity Markets and the Decline in IPOs (September 2019). NBER Working Paper No. w26317

Case Study: WestJet Airlines

6 “WestJet Glides into Private Markets in CAD 5 Billion Transaction With Onex Corporation; Raising Fair Value.” Morningstar Equity Research. May 2019. Danny Goode.


Comparing the performance of private equity to public equity is a difficult task. Private funds are not

subject to the same reporting requirements as mutual funds regulated by the Securities and

Exchange Commission. Still, available data paints a positive picture for the performance of private

equity. One example is a 2015 paper published by professors Robert Harris, Tim Jenkinson, and

Steven Kaplan, which studied 1,800 North American buyout and venture capital funds. They found

that the average buyout fund returns for all vintage years but one before 2006 have exceeded those

from public markets, while the performance of venture funds is more mixed.7

An Altered Opportunity Set

For investors, there are profound consequences to the rise of private markets. The 2018 CFA Institute

study Capital Formation: The Evolving Role of Public and Private Markets links the rise of private

markets to a narrowing opportunity set for public-market investors. “[P]ublic equity markets and the

stock market indices that represent them increasingly may be exposed to more mature businesses

and less (directly) exposed to smaller, newer companies, and to sectors with higher

growth potential.”8

To access private markets, several hundred U.S. mutual funds have built stakes in private firms. This

practice has raised some alarm bells, as the investments seem at odds with mutual funds’ commit-

ment to daily liquidity and daily pricing. According to “Unicorn Hunting,” a report examining mutual

fund ownership of private companies, Morningstar Manager Research analyst Katie Reichart found

that private-firm equity investment—mostly VC-backed companies—totaled just 0.15% of U.S. large-

cap equity universe’s $5.1 trillion in assets as of December 2017. Only nine funds held private-firm

stakes greater than 5% of assets.

Institutional investors, for their part, have become active players in the private markets. Willis Towers

Watson predicts that global asset owners will raise their allocations beyond the 14% level estimated

today. The Yale University Endowment, considered a pioneer, allocates more than 30% of its assets

to private equity. Some large sovereign wealth funds even team up with private equity funds to take

companies private. Canada’s Brookfield Asset Management and Singaporean sovereign wealth fund

GIC teamed up to buy out U.S. freight railroad owners Genesee & Wyoming. With so much value in

the private markets, investors seek access to the full spectrum of invest ment opportunities.

The dramatic expansion of private markets has led to calls for broadened accessibility. The aforemen-

tioned CFA Institute study on capital formation concludes:

“There are benefits to both public and private capital markets, and so the ability to allocate to both is

important…Having increasingly large sections of capital markets being out-of-bounds for pension sav-

ers is unlikely to be politically viable or even desirable in the long term… It is not credible to allow an

entire generation of retail investors to be left with only diversified public market exposure to generate

retirement returns, while institutional investors crowd into innovative business models that offer poten-

tially higher returns.” 9

7 Harris., Robert, Jenkinson, Tim, and Kaplan, Steven. “How Do Private Equity Investments Perform Compared to Public Equity?” Darden Business School Working Paper No. 2597259. June 15, 2015.

8 Rosov, Sviatoslav, “Capital Formation: The Evolving Role of Public and Private Markets,” CFA Institute. 2018.

7 Rosov, Sviatoslav, “Capital Formation: The Evolving Role of Public and Private Markets,” CFA Institute. 2018.


On this logic, steps are being taken from both the top down and bottom up to open up private

market investing. SEC Chairman Jay Clayton floated the concept of bringing private equity funds to

retirement savers at the retail level. While the notion would require fundamental changes to

disclosure and regulation, the fact that it is on the table reflects the growing importance of private

assets. Meanwhile, Vanguard announced a private equity fund for its institutional clients with the

intention of eventually opening it up more broadly.

Private-Market Investment Challenges

gRegulation requires investors to be “qualified” or “accredited,” so household participation in private

markets is limited to the high-net-worth segment. Pensions, endowments, foundations, and sover-

eign wealth funds increasingly invest in private equity funds, which require large capital outlays and

a long lockup period—often 10 years. Private equity fund lifespans have extended, and new funds

with longer durations have launched.

gDiversification is another challenge when it comes to private equity investing. Private equity and

venture capital funds focus on different stages of investment—early stage, midstage, and late stage.

There’s also a range of capital structures employed, including equity, debt, and mezzanine financing.

Private equity funds can target a variety of industries. PitchBook categorizes companies in its venture

capital, private equity, and M&A database into more than 50 “verticals.” These include such

burgeoning areas as adtech, augmented reality, and oncology. Meanwhile, roughly 40 industry

groupings include more “Old Economy” segments, such as metals, minerals, and mining,

forestry, and containers and packaging.

gThe “J Curve” effect is yet another pitfall faced by private equity investors. This refers to a

phenomenon whereby an initial investment in a private equity fund stagnates for two to three years

before (in an ideal scenario) appreciating. It can take time for general partners to deploy capital

and for investments to pay off. Meanwhile, hefty management fees eat into principal. Below is an

illustration of how the J-Curve effect might play out in practice.

Exhibit 3. The “J Curve” Effect is a Common Challenge Faced by Private Equity Fund Investors

80

60

20

40

-20

0

-40

-60

150

100

50

0

-50

-100

Yr. 1

Yr. 2

Yr. 3 Yr. 4

Yr. 5

Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10

Management Fee Capital Calls CarryDistributions Net Gain

Source: PitchBook—For illustrative purposes only.


gFinally, there’s the issue of fees. The classic private equity fund fee structure is 2% of committed

capital, plus a performance fee on investment profits of 20%—commonly known as “2 and 20.” Fees

have attracted scrutiny from policymakers and are targeted by the Stop Wall Street Looting Act

introduced in July 2019 by Sen. Elizabeth Warren and others. According to a 2019 survey, 73% of

limited partners invested in private equity funds agreed that “private equity fees are difficult

to justify internally,” up from 63% in 2018.10 It is not just the level of fees and preferential U.S. tax

treatment that have attracted ire, but the issue of fee transparency.

Listed Private Equity: A Gateway to Private Markets

Publicly traded vehicles that invest in privately held businesses are an attractive gateway to

private markets. Listed private equity allows investors to access private equity opportunities while

circumventing obstacles such as high investment minimums, regulatory constraints, and lockup

periods. On the last point, even the most patient of asset owners like ready access to their capital.

Yngve Slyngstad, of the Norwegian Government Pension Fund, complained of PE’s “duration

of implementation” being “so long.”

Listed private equity can take different forms, including the shares of private-equity-focused

investment managers and closed-end funds. The first route was opened when Kohlberg Kravis

Roberts raised $5 billion in a 2006 initial public offering and Blackstone floated its shares

one year later, raising $4 billion. The Carlyle Group went public in 2012. While the share price

performance of publicly traded private equity managers is not the same as the performance

of the funds they manage, ultimately investment acumen will drive business results. Good returns

attract assets. Fees are collected on the basis of both assets and performance.

What about performance? PitchBook compared the returns of flagship funds run by four publicly

traded firms—Apollo Global Management, Blackstone, the Carlyle Group, and KKR—to those

managed by four private PE firms with similar flagship fund sizes—Advent International, Bain

Capital, TPG Capital, and Warburg Pincus. They found that the flagship funds managed by

the public cohort outperformed the private cohort on average. This outperformance was measured

by internal rate of return, which considers cash flows from and to investors, and represents

net-of-fees performance.

10 Bippart, Graham. “Fees Continue to Be a Sore Point,” Private Equity International. 11 December 2019.


Exhibit 4. Publicly-Traded Private Equity Managers Have Produced Superior Fund Returns to Their Private Counterparts

20%

15

10

5

0 3-Year 5-Year 10-Year 15-Year

12.0

15.7

11.0

15.4 15.4

11.010.2

14.6

Private Cohort Public Cohort

Source: PitchBook, Flagship buyout funds of selects firms - 1997-2014 Vintage.

But defining the pool of publicly traded private equity managers is not a straightforward task.

Complicating matters are companies like Apple and Google with significant corporate venture arms.

Even a company like Blackstone Group is tricky. One of the world’s foremost private equity players

with more than 700 investments over the past 15 years, Blackstone has diversified its business.

It now describes itself as a “an alternative asset manager” with a focus not just on private equity,

but also real estate, credit, and hedge funds. In fact, private equity now represents a minority

of Blackstone’s overall assets under management.

Exhibit 5. Blackstone Assets Under Management

Private Equity$183 Bil

Real Estate$163 Bil

Credit$144 Bil

Hedge Funds$81 Bil

32%

29%

25%

14%

Source: Blackstone website, February 2020


Another section of the universe is private-equity-focused closed-end funds—mostly investment

trusts listed in the U.K. Also exchange-traded companies, they are pools of capital that invest in

a portfolio of assets. Some directly own private companies. Others take a funds-of-funds approach,

meaning that they invest in private equity funds. As with any closed-end fund, discounts or

premiums can open up between share price and net asset value. Discounts became dramatic during

the 2008 financial crisis. But closed-end funds can also provide an attractive access route to private

company equity. Says Emma Osborne, head of London-listed ICG Enterprise Trust: “Listed private

equity funds are effectively giving shareholders access to the same type of investments that

are attracting institutional investors.”11

Introducing the Morningstar PitchBook Listed Private Equity Indexes

Morningstar PitchBook Listed Private Equity Indexes highlight publicly traded companies with

significant private equity exposure. The indexes focus on developed markets in North America,

Europe, and Asia. They provide ease of access to a diversified group of publicly traded companies

with private equity exposure and emphasize pure-play private equity firms. The indexes

leverage unique data sets from PitchBook for security selection and weighting.

An Emphasis on Investability

The indexes’ starting universe includes companies listed on developed-markets exchanges, as

classified by Morningstar Indexes, that have had more than three active private equity deals during

the past 10 years, market capitalizations of more than $100 million, and three-month average

daily trading volume greater than $250,000.

The indexes select companies whose primary industry is classified by PitchBook as private equity,

including those involved in venture capital, private equity buyout, private equity growth,

or mezzanine financing. Constituents include direct private equity investors, alternative asset manag-

ers, fund-of-funds, holding companies and closed-end investment vehicles.

Weighting Methodology: Purity Score

Morningstar’s proprietary Private Equity Exposure Weighting Methodology is designed to provide

investors with purity of exposure to private markets through listed private equity. It begins

with float-adjusted market capitalization, but tilts the constituent weights based based on their

underlying exposure to private equity.

The methodology applies a Purity Score to ensure that pure-play private equity firms get higher

weight in the index. The score is determined by a firm’s percentage of private equity or venture

capital investments as a share of the overall investment portfolio. Investments in buildings or real

estate are not considered PE or VC.

11 “The Rise of Individual Investors: Listed Private Equity,” Rod James, 8 August 2018. Private Equity International.

PitchBook’s Private Fund Database PitchBook classifies private-market focused funds into a number of different buckets:

gPrivate equity: Buyout, growth/expansion, mezzanine, restructuring/turnaround, and diversified PE

gDebt: direct lending, bridge financing, dis-tressed debt, credit special situations, infrastructure debt, venture debt, and real estate debt

gReal assets: Real estate, real estate core, real estate core plus, real estate distressed, real estate opportunistic, real estate value added, energy, infrastructure, mining, timber

gVenture capital

gSecondaries

gFund of Funds


Portfolio Diversification

The methodology includes the following constraints to ensure diversification:

gInvestment stage. Constituent weight is constrained by exposure to different investment stages,

informed by PitchBook data. This is both a risk-control measure and a way to reflect the state of the

market. Aggregate weight devoted to late stage, midstage, and early stage is capped at 80%,

20%, and 10%, respectively.

gSecurity. Individual security weight is capped at 10%. The aggregate weight of securities with

weights greater than 5% is restricted to 40% of overall index weight. This assures that performance

is not overwhelmed by a few constituents.

gLiquidity. Li quidity-informed weighting is based on how easily a position can be built or unwound.

The calculation is based on a position’s average daily trading volume, number of days to trade,

percentage of a position’s average daily trading volume in one day, and assets under management.

Exhibit 6. Morningstar PitchBook Listed Private Equity Indexes Construction Process

MorningstarPitchBookListed PrivateEquity Indexes

Eligible Universe Selection

g Companies listed in developed market exchanges with > 3 active private equity deals during last ten years

g Select securities with private equity as primary industry*g Select securities classified as: – Venture Capital – PE/Buyout – PE Growth – Mezzanineg Select securities with substatial PE investment

g Securities should have market cap of > 100 Mil USD and 3-month average daily traded value of > 250k USD

g Float market cap weighting adjusted for purity score subjected to investment stage, concentration and liquidity constraints

Liquidity and Market Cap Screens

Weighting

*Primary industry classifcation as per PitchBook

Index Reconstitution/Rebalancing

The indexes reconstitute, or resets membership, once per year, in December. Index weight is

rebalanced, or brought back to target weight, each quarter.

Morningstar PitchBook Listed Private Equity Indexes: Strong Performers Offering

Broad and Unique Exposures

From December 2012, the indexes have produced strong returns relative to the broad market.12

As shown in the simulated returns below, The Morningstar PitchBook Developed Markets

Listed Private Equity Index has outperformed its parent, the Morningstar Developed Markets Index,

over that period.

12 To produce a historical back-test, current in-dex constituents were held constant back to 2012. Market capitalization has been adjusted for, but purity scores and investment stage exposure data was back-propagated using November 2019 data.

The Purity Score in Practice Onex is a Toronto-based investment manager whose assets under management as of mid-2019 approached $40 billion in U.S. dollars. Onex’s Purity Score is high because it is close to a private equity pure play, with more than 30 active investments through buyout and leveraged buyouts and PE growth deals. Examples include AutoSource, a used-vehicle retailer; Carestream Health, a provider of medical technology; and WestJet, a Canadian airline and travel company.

Apollo Global Management, by contrast, has a significantly lower Purity Score than Onex. Apollo is a well-known private equity player that emerged from the demise of Drexel Burnham Lambert; it owns such companies as Cox Media Group, Caesars Entertainment, and ADT. But like Blackstone, Apollo has diversified its business and now describes itself as an “alternative asset manager.” Apollo’s $200 billion in assets under manage-ment are spread across private equity, credit, and real estate. Private equity is a meaningful portion of Apollo’s business, but it’s not a pure play to the extent of Onex.


Exhibit 7. Growth of a $10,000.00 Investment

30,000

25,000

20,000

15,000

10,000 2014 2015 2016 2017 2018 2019

Morningstar PitchBook Developed Markets Listed Private Equity Index Morningstar Developed Markets Index

2013

Source: Morningstar Indexes. Data as of Dec. 31, 2019.

The indexes provide exposure to securities that may not be held elsewhere in a portfolio or may be

held at a low level of exposure. The private equity investments made by index constituents are

diversified across more growth-leaning areas, such as technology and healthcare, as well as across

more “Old Economy” value-leaning areas, such as financials and energy. The constituents’ private

equity investment breakdown by sector is shown below:

Exhibit 8. Underlying Sector Exposure of Index Constituent Investments

h Cyclical

r Basic Materials 6.0

t Consumer Cyclical 9.8

y Financial Services 21.9

u Real Estate 8.3

j Sensitive

i Communication Services 1.0

o Energy 8.0

p Industrials 17.8

a Technology 9.8

k Defensive

s Consumer Defensive 7.0

d Healthcare 10.0

f Utilities 0.4

Other 0.1

Source: PitchBook data on Private Equity Fund Investments mapped to Morningstar Global Equity Classification by Morningstar Indexes. Data as of December 2019.

Conclusion

Publicly traded vehicles that invest in privately held businesses are an attractive gateway to private

markets. Listed private equity offers an ideal way for investors to gain access to an asset class that

is otherwise outside their reach. The Morningstar PitchBook Listed Private Equity Indexes provides

efficient, diversified and liquid exposure to publicly traded companies with significant private equity

exposure. Given the growth of private markets and a changing opportunity set, the indexes make

a great addition to investors’ toolkit.


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Where Public Meets Private: Accessing Private Markets