The public market pie is shrinking. Here’s what investors are missing

Note: this interview was recorded Tuesday, 23 June 2026

The expansion of investor access to private equity has seen the market undergo a fundamental transformation that makes the opportunity set genuinely more compelling than it was even five years ago.

EQT’s Frank Heckes, who has spent two decades in private equity, said the sector is in the midst of “one of the most consequential periods” that he’s seen in as long as he can remember.

Two forces are driving that view. The first is the sheer scale of what is now private. Somewhere between 85 and 90% of companies with revenues above $100 million are private across Asia, Europe and the US. Investors who limit themselves to public markets are working with a shrinking slice of the pie.

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The second is AI. For a technology-focused investor like EQT, the pace of innovation is creating possibilities that simply didn't exist before, both within portfolio companies and in how managers source deals, govern businesses and create value.

Darrell Clark from Lonsec added a third dimension: the proliferation of products giving a broader investor base access to private markets for the first time.

"Probably about seven years ago, we started to see a little bit of a trickle of products coming in and that's really become a stream over the last three to four years," Clark says.

In the interview above, Heckes and Clark break down what these structural shifts mean for the private equity market, how firms can respond to investor concerns, and the hallmarks of a great manager.

Has the playbook changed?

Over the last decade or so, persistent low rates and the associated low financing costs have been a boon for private equity.

Now, as Clark explains, a world of high valuations and favourable exit markets has been turned on its head.

“When you see these cycles come and go, it can lead to a little bit more manager dispersion,” he says.

“I think that's natural. You can probably level the argument that over a lot of the last 10 to 15 years, multiple expansion has done some of the heavy lifting.”

If that’s no longer the case, then managers that can make operational improvements to companies are the ones that will have a “true edge in the market”.

However, despite the broader environment shifting, Heckes doesn’t believe the private equity playbook is any different.

“Long-term value creation and really caring about all of the stakeholders has been something that we've had from inception. I don't think any of that's changed,” he says.

“We're a growth investor that's really thinking about the long-term opportunity for a business over a 10-plus-year journey, not just a three-year journey and we make investments based on that longer-term value creation mindset.”

Feature or a bug?

Alongside the influx of new investors comes a wider audience that is unaccustomed to the way private markets operate. Right at the top of the list of concerns are liquidity, transparency and valuations.

“All of those areas are probably what makes private markets private,” Clark says.

“Private markets aren't necessarily fair, they're opaque. That's what makes private markets great because they're less efficient and some people have got a bit of an information edge over others."

But liquidity is the concern he flags as most topical right now and whether or not it is an issue for investors comes down to understanding what they are getting into.

“Private equity managers are now targeting a whole different audience. Does that new audience really understand that liquidity here is not something that can be taken for granted? It's not a guarantee and it's conditional on a number of different things,” Clark says.

Heckes acknowledged that there is a trade-off for investing in private equity, but reframed it as a feature rather than a bug.

“There is perhaps a liquidity offset, but the benefit is that you're accessing a much larger market,” he says.

“Getting access, particularly in regions like Asia, which is the fastest growing region in the world, is more challenging to do in a public market setting.”

However, even though there is less transparency in private markets, Heckes says that creating trust with EQT’s investors is a core value for the firm.

“A key part of trust is transparency,” he says.

“How do we make sure that we are always improving on the quality and depth of our communication?”

For EQT, that means more frequent reporting, clearer articulation of value creation plans, and deeper visibility into the trading performance of portfolio companies.

Separating wheat from chaff

The question for Lonsec is how the researcher determines the quality of a private equity manager. The answer is a dedicated framework that goes beyond the standard criteria applied to public market funds.

Track record is necessary but not sufficient. Clark's team digs into whether the deal teams that generated historical performance are actually the same ones running the current product, and whether a track record built in drawdown structures is genuinely portable to an evergreen vehicle.

“The thing we find interesting in private markets, which is a differentiator to public, is that they aren't necessarily a fair market. It's less efficient, not everybody's got access to the same information,” he says.

In this context, part of evaluating a manager is understanding if they have an informational edge or proprietary deal sourcing.

Compass pointing north

EQT’s investment in Compass Education is an example of how a private equity firm can leverage its global holdings and experience to create value beyond an injection of capital.

The Melbourne-based, cloud-native platform connects teachers, parents and school administrators and aims to replace fragmented, outdated systems with a single, transparent interface.

Heckes explains that EQT partnered with founder John de la Motte not simply to provide capital, but to bring the full weight of its global network to bear on accelerating the business.

"The reason to come together there was to provide John - who's an exceptional founder and entrepreneur - with a global set of perspectives and access to capital that allows him to supercharge the growth of his business," Heckes said.

What this meant in practice was connecting Compass with Nord Anglia, which is the world's largest private school operator and also in the EQT stable, and a management team that could provide insights that no purely financial partner could replicate.

EQT also opened up access to procurement advantages, global executives who had scaled similar businesses, and AI partnerships with Silicon Valley firms that have helped Compass reduce the cost of delivering better outcomes for its school customers.

It’s a clear illustration of how the underlying ethos of quality private equity investing can hold up even as the environment is changing and why taking an active value creation role is able to deliver results.

“Fundamentally in the end, it's about performance.”