Inside Active: Liberty Street’s Moss on Private Company Research

The article discusses how investors are adapting as more companies stay private longer, focusing on how active managers research, value, and portfolio-manage late-stage private companies. It frames private-share investing as a growing pathway to access growth previously captured in public markets, without citing specific deals, performance figures, or policy changes.

Analysis

The investable implication is a duration trade: capital formation is migrating from public markets to private platforms, which lengthens fee-bearing asset lives and concentrates monetization power with managers that can source, warehouse, and exit illiquid growth. That favors scaled alternatives franchises such as BX, KKR, APO, and CG, while marginally pressuring ECM-heavy banks and brokers whose underwriting pipeline shrinks when companies defer listing.

The second-order effect is valuation opacity. More value created off-exchange means less frequent mark-to-market, so reported stability can be misleading until the exit window closes; then secondary discounts can gap wider over a 1-3 quarter window. The key catalyst is not the private-market narrative itself, but a real-rate decline or reopened IPO window, which would shift bargaining power back to public capital markets and re-ignite fee-sensitive issuance.

Contrarian view: the market may be underestimating liquidity risk in late-stage private portfolios. If 2021-vintage marks are still embedded in fund NAVs, a slower exit environment could force secondaries at wider discounts, hurting both performance fees and new fundraising. Falsifier: a sustained pickup in IPO count/value and healthier aftermarket performance over the next 2-3 quarters, which would weaken the case for a persistent private-market premium.

Key Decisions for Investors

• Accumulate a small basket long BX/KKR/APO on market weakness; 6-18 month structural beneficiary if private duration keeps extending. Risk/reward is best if entry is on a pullback rather than chase.
• Pair trade: long KKR or BX vs short IPO (Renaissance IPO ETF) as the cleanest expression of 'more companies staying private longer.' Target relative outperformance over 3-6 months; cover if IPO issuance meaningfully reaccelerates.
• Treat GS/MS as only partial beneficiaries and hedge any exposure to private-market enthusiasm with a short in IPO or a public-growth basket; the public-underwriting fee pool is the more direct loser in the next 1-2 quarters.
• Set a watch item on IPO counts, first-day performance, and secondary discounts; if those improve for two consecutive quarters, reduce private-markets longs because the exit window is reopening.