What’s the better investment: a mutual fund or the stock of the mutual fund manager? Morningstar analysts tackled this question several times in the 1990s and 2000s, comparing fund returns with the share price performance of publicly traded fund managers. Back then, the data typically favored the latter.
But times have changed. In “New Era for US Asset Managers” Morningstar senior equity analyst Greggory Warren cited fee compression, the shift to passive investing, regulatory changes, distribution costs, and an aging population as headwinds facing traditional asset managers. It’s not surprising that the Morningstar industry index of publicly traded asset managers has lagged the broad equity market over the past decade.
The picture is very different, though, for asset managers specializing in private markets. The Morningstar PitchBook Developed Markets Listed Private Equity Index has gained 281% in cumulative terms for the 10 years through 2024 compared with a 163% advance for the broad market for developed equities. Companies like Blackstone BX, KKR KKR, Partners Group PGHN, and ICG ICG have seen their share prices surge, reflecting a boom in private markets.
Private market growth leads me to ask two big questions:
- Are the shares of publicly traded private market managers outperforming actual private market investments?
- Will the good times for private markets keep on rolling?
The answers aren’t clear, but they are worth contemplating.