Private markets have soared to $10 trillion in AUM. But why have they underperformed public markets?

Or a contradiction, perhaps: The U.S. private markets are bigger than ever, and the source of trillions in company value creation. And, at the same time, for the last several years, the private markets as a whole have underperformed the public markets. 

I was thinking about this late last week as I sat at an event run by investment manager Hamilton Lane, running through data on the somewhat bemusing state of the private markets. It’s not that the vibes are wholly bad, per se. But there are a few major striking numbers that bear out this contradiction. 

First, there’s now $10 trillion in assets under management across all private assets, according to Hamilton Lane. Simultaneously, the S&P 500 has outperformed private equity over the most recent ten-year period. (The difference is by about 200 basis points: At the end of September, the S&P was at 15.3% and PE was at 13.2%.)

And this isn’t all about AI, though AI is certainly lopsiding everything. The private markets, amid the AI boom, have looked at best concentrated (recent PitchBook data showed that, in venture dealmaking, if you cut out the five largest deals, Q1’s record-high $267.2 billion in deal value drops by a staggering 73.2%). At worst, the private markets have looked wildly irrational. Then again, you could say the same of the public markets: Allbirds’ wildly baffling announcement that it’s now eschewing its feathery sneakers to be an AI company sent its stock rocketing by 70% in response. (I’ve never much believed in the idea that markets are perfectly efficient. I think markets are narrative-vehicles, but that’s me. So, I mean, I guess.)

We’re also, very possibly, nearing a public-private market collision that could get weird. If SpaceX does, in fact, go public, it’ll be the largest IPO ever. But as Tom Kerr, Hamilton Lane’s co-head of investments and co-head of secondaries, pointed out (I think, correctly): “I don’t know where all that money is coming from.” Elon Musk is reportedly looking to raise up to $75 billion as SpaceX goes public. Does that money exist? We’ll see. 

And if SpaceX, Anthropic, and OpenAI all go public in tandem, it will test the financial instrument wild card of the private markets—secondaries, which I’ve marveled at, in part because we just don’t know how big the secondaries market even is. 

“In the overall quantum valuation associated with these companies, the specific risk that may exist today is: Are you rolling in and funding SpaceX pre-IPO…above the IPO price?” said Kerr. “It’ll be interesting to see the secondary trades that have been happening in those companies. When Uber went public, there was a lot of activity. But ultimately, if you’d just waited and bought the stock three months after it went public, that would have been a better trade.”

I don’t know what the answer is. The narrative, having spent years covering venture, is that the private markets are the place for outsized returns. But maybe there’s no such place, and the pursuit of outsized returns is inherently the result of unreasonable wonders and accidents.  

What I will say is this: If these mega-IPOs do materialize, they’ll be more complicated than all-out victories for the companies and investors. The tide could wash out, and things could get messier than ever. And then perhaps, we’ll get some answers.

See you tomorrow,

Allie Garfinkle
X: @agarfinks
Email: alexandra.garfinkle@fortune.com

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VENTURE CAPITAL

– Loop, a San Francisco-based AI platform designed for logistics and supply chains, raised $95 million in Series C funding. Valor Equity Partners and the Valor Atreides AI Fund led the round and were joined by 8VC, Founders Fund, Index Ventures, J.P. Morgan Growth Equity Partners, and Tao Capital Partners.

– Astelia, a New York City-based cybersecurity platform, raised $35 million in Seed and Series A funding from Index Ventures, Team8, and Holly Ventures.

– Zenskar, a New York City-based AI-powered billing and revenue automation platform, raised $15 million in Series A funding. Susquehanna Venture Capital, Bessemer Venture Partners, Shine Capital, and Rho led the round and was joined by J Ventures, Future Back Ventures by Bain & Company, Rocketship, and Converge.

– Coral, a New York City-based health care automation platform, raised $12.5 million in seed funding. Lightspeed and Z47 led the round.

IPOS

– Kailera Therapeutics, a Waltham, Mass.-based developer of GLP-1s for obesity, raised $625 million in an offering of 39.1 million shares priced at $16 on the Nasdaq.

– Aevex, a Solana Beach, Calif.-based defense technology company, raised $320 million in an offering of 16 million shares priced at $20. 

– Alamar Biosciences, a Fremont, Calif.-based protein detection and analysis company, raised $191 million in an offering of 11.3 million shares priced at $17 on the Nasdaq.

– Cerebras Systems, a Sunnyvale, Calif.-based AI infrastructure company, filed to go public on the Nasdaq. The company raised $510 million in sales for the year ended Dec. 31. Alpha Wave, Benchmark, Eclipse, Fidelity, and Foundation Capital back the company.

– Fervo Energy, a Houston, Texas-based geothermal energy company, filed to go public on the Nasdaq. Devon Energy, Capricorn Investment Group, DCVC, Breakthrough Energy Ventures, and Centaurus Capital back the company.

– GMR Solutions, a Lewisville, Texas-based emergency medical services provider, filed to go public on the New York Stock Exchange. The company posted $5.7 billion in sales for the year ended Dec. 31. KKR, Koch, and HPS back the company.

– Liftoff Mobile, a Redwood City, Calif.-based marketing and monetization platform for mobile businesses, filed to go public on the Nasdaq. 

– Mobia Medical, an Austin, Texas-based developer of medical devices, filed to go public. The company posted $32 million in revenue for the year ended Dec. 31. U.S. Venture Partners, GPG Healthcare Opportunities Fund, Osage University Partners, Lyda Hunt – Bunker Trust – Elizabeth H Curnes, Synapse Investment, Coöperatieve Gilde Healthcare, and Longitude Venture Partners back the company.

– Odyssey Therapeutics, a Boston, Mass.-based biopharmaceutical company, filed to go public on the Nasdaq. The company posted $3 million in sales for the year ended Dec. 31. SR One Capital Management, OrbiMed Private Investments, Fidelity Mt. Vernon Street Trust: Fidelity Series Growth Company Fund, Jeito Capital, TPG, Lightspeed Venture Partners, and Dimension Capital back the company.

FUNDS + FUNDS OF FUNDS

– Sideline Group, a New York City-based investment firm, raised $155 million for its first fund focused on companies in the consumer, sports, and media & entertainment sectors.