US. Private equity’s allure poses big risks for the stock market and its investors in the next recession
Private equity has taken center stage in active investing, and that means the stock market and its investors could face more challenges — especially in a recession. The transition is already underway and according to asset manager AllianceBernstein, won’t be ending soon.
In a note to clients this week, the firm outlined an upcoming decade in which the “main expression of active investing” is in private markets. Analysts say this shift introduces potential problems. Liquidity could dry up in public markets, causing more volatility. And retail investors may have fewer high-growth opportunities as companies easily raise money privately, opting out of listing on exchanges. Alternative assets are off limits unless you’re a qualified, or accredited investor.
“It throws a spotlight on the resilience of the liquidity of public markets and even questions the point of a public stock market,” Bernstein senior analyst Inigo Fraser-Jenkins said in a note to clients this week. “Soon, active investing is going to be mainly in private markets.”
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