Why Accurate Pricing Data Matters as Private Equity Enters the Index Era

The lines between public and private markets are blurring faster than ever. This week, index provider MSCI launched a new benchmark that combines public and private equities into a single index—a development that raises important questions about how we price assets that don't trade on public exchanges.

The New Reality: Private Equity Meets Indexing

MSCI's new All Country Public + Private Equity index allocates 15% to private equity, combining 8,300 listed companies with valuations from 10,000 private equity funds globally. As Luke Flemmer, MSCI's head of private assets, told the Financial Times: "The lines around public and private equity are blurring."

This isn't just a product launch—it's a signal of where the industry is heading. With private equity assets under management more than doubling to $4.7 trillion since 2018, investors increasingly want exposure to this asset class. But unlike public stocks that trade millions of times per day with transparent pricing, private companies present a fundamental challenge: how do you value something that rarely trades?

The Pricing Problem

Public equities have a clear advantage: price discovery happens continuously through market transactions. Every second, buyers and sellers agree on prices, creating a real-time consensus on value.

Private companies are different. They might see a formal valuation once per quarter—or only when a funding round or transaction occurs. Between those moments, their "value" is essentially an estimate based on:

• Last funding round valuations
• Comparable public company multiples
• Secondary market transaction data
• Fund manager assessments

This creates what some call the "stale pricing" problem. When markets move quickly—as they did in 2022—private valuations can lag reality by months, creating a disconnect between reported values and actual market conditions.

Why This Matters for Everyday Investors

The MSCI index launch matters because it's part of a broader trend: making private markets accessible to more investors. Consider:

• Evergreen funds with no fixed end dates are increasingly marketed to wealth managers and their clients
• Wealthy investors hold roughly 50% of global capital but represent just 16% of assets in alternative investment funds, according to Bain
• Major financial institutions are building products to democratize private market access

As these products proliferate, the quality of underlying pricing data becomes crucial. An index is only as good as the data that feeds it. If private company valuations are stale, inconsistent, or opaque, the index—and any products built on it—may not reflect reality.

The Data Infrastructure Gap

MSCI's move into private assets hasn't been cheap. In 2023, the company paid $697 million to acquire Burgiss, a private asset data analytics company. BlackRock followed suit, paying £2.55 billion for Preqin earlier this year. These acquisitions underscore a simple truth: reliable private market data is valuable precisely because it's hard to obtain.

Unlike public markets, where pricing data flows freely from exchanges, private market data requires:

• Relationships with fund managers and limited partners
• Access to secondary transaction records
• Sophisticated models to estimate values between transactions
• Continuous monitoring of comparable public companies

What This Means for Secondary Market Participants

For those of us who work in the secondary market—connecting buyers and sellers of private company shares—this trend toward indexing validates something we've long understood: transparent, accurate pricing is essential for a functioning market.

Secondary transactions provide one of the few sources of real price discovery in private markets. When a shareholder sells SpaceX stock at $185 per share, or Stripe trades at a 40% discount to its last funding round, those are actual transactions between willing buyers and sellers. This data is invaluable for:

• Investors benchmarking their portfolios
• Index providers trying to track private market performance
• Companies understanding their true market value
• Regulators monitoring private market activity

The Bottom Line

MSCI's combined public-private equity index is a milestone, but it also highlights the work ahead. As private markets become more accessible through indices, ETFs, and evergreen funds, the demand for accurate, timely valuation data will only grow.

For investors considering private market exposure—whether through new index products or direct secondary transactions—understanding how valuations are determined is essential. Not all private market data is created equal, and in an asset class where prices aren't set by continuous trading, the methodology behind the numbers matters as much as the numbers themselves.

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The FT article referenced in this piece is available at ft.com. Premier Alternatives provides secondary market transaction services for private company shares.