EDHEC: How different are Private Equities from Public Equities?

30 september 2025

By Evan Clark, Senior Private Market Analyst, EDHEC Infrastructure & Private Assets Research Institute

A recent Scientific Infra & Private Assets (SIPA) report entitled ‘What is the Private Equities Market? And how different is it from public equities?’ establishes that there are significant differences between the private and public equities space. Public markets have far fewer companies (48k vs ~1 million+) relative to the private equities market, while the median and mean size and profitability is greater than observed in private markets. This has implications when comparing returns and risk across the two markets.

Comparisons between public and private equities frequently centre around returns. Many institutions still use public equities proxies to benchmark their private equities performance. There is less discussion exploring the differences in characteristics between the two markets, whether it is related to the players or the size and profitability of the companies. There are material differences between the two markets. As at year-end December 31, 2024, the typical listed firm is significantly larger than the private equities equivalent:

• Global market capitalisation of listed equities was $ 123 trillion, spread across ~48k companies. Median market capitalisation exceeded $ 2 billion.
• The privateMetrics® Broad Market Universe (BMU) had a market capitalisation of $ 60 trillion and an Enterprise Value (EV) of $ 112 trillion spread across 934k firms. Median market capitalisation of the Market Index Universe (MIU) was $ 276 million (EV - $388Mn), significantly smaller than that observed for listed firms.
• Key differences exist across profitability, valuation multiples, leverage, and index sectors.
• The market controlled by private equity fund managers is just a small subset of the overall private equities market. With buyout AuM of ~$5 trillion at end of 2024, this accounts for just over 10% of much larger private equities market. The market owned by private equity funds is not the entire private equities market, far from it.

Systematic risk

As demonstrated in our previous column, ‘Market Risk in Private Equities,’ it was established that private equities asset pricing discriminates by systematic risk factors and firm characteristics. This was the case at the individual firm level across the BMU, a large transaction database of completed transactions, and technical insolvency cases. The private equities market prices risk factors such as size, growth, profitability, leverage, and maturity. There is also discrimination across PECCS® pillars such as Activity Class, Lifecycle, Revenue Model, and Value Chain. This stresses the importance of using the correct market to price or benchmark assets, as differences with the listed equities market render it less effective as a proxy.

Expected Returns

Discount rates (or expected returns) across both markets indicate distinct markets. Listed and private equities expected returns are correlated but have meaningful spreads of 100-600bps, with differing movements in risk premiums.

Conclusion

We have established that there are significant differences between the private and public equities space. Public markets have far fewer companies (48k vs ~1 million+) relative to the private equities market, while the median and mean size and profitability is greater than observed in private markets.

The private equities market is much larger than the space occupied by private equity fund managers. In fact, it is at least 10x the size. This implies that the pricing dynamics are impacted by a broader group of players, including corporates, family firms, individual, and other groups.

Despite differences, both markets incorporate multiple systematic risk factors when pricing assets. Discount rates (or expected returns) show there is some link between the two distinct markets. Further, they are not constant and vary with market conditions. This contrasts with the view of a fixed ‘liquidity premium’ or other spread vs bond yields or proxies.

The private equities market is a very large market with its own set of players and characteristics. This has implications for asset pricing and benchmarking performance. Institutions that continue to rely on referencing public equities returns against private equities returns, risk conflating two markets with different dynamics. This has the potential to mislead constituents and beneficiaries regarding the true risk-adjusted performance.