The Case Against Private Markets

Who are we fooling with stale valuations? 

May 2024. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • There can be large discrepancies between private and public market valuations
  • Blackstone’s Real Estate Income Trust (BREIT) seems to have been immune to the downturn in property markets
  • It is difficult to explain this except by stale valuations, which represents significant downside risk


Alternative asset classes like private equity have exhibited strong asset growth as institutions have increased their allocations consistently since the global financial crisis in 2009, attracted by strong and consistent returns. Lately, even financial advisors and retail investors have gotten access to such strategies via dedicated wealth tech platforms such as iCapital in the U.S. and Moonfare in Europe.

It was a rare setback for alternative asset managers in April 2024 when the Norwegian government denied the Norges Bank Investment Management, the world’s largest sovereign wealth fund with $1.6 trillion of assets under management, to allocate 5% to private equity investments. The Norwegian Finance Minister explained his decision with fees being too high and transparency being too low.

The success of private equity can be explained by buying businesses with debt and benefitting from declining interest rates over the last four decades, by increasing equity multiples, and not having to mark to market its assets, which understates the volatility of investments but makes them look superior on paper. If the market for selling private assets does not look favorable, then investments are simply held longer, even if it means extending the lives of private equity funds.

This playbook has been a recipe for success that propelled the assets under management in private equity to more than $4 trillion, but has come to an end when interest rates started increasing in 2022. However, most alternative asset managers do not want the party to end and some continue to live in castles in the sky, along with many institutional investors.

In this article, we will highlight the discrepancy between public and private markets using the Blackstone Real Estate Income Trust (BREIT) as a case study.


The Blackstone Real Estate Income Trust (BREIT) is the world’