Morningstar’s Kunal Kapoor on the Public/Private Market Convergence

At the recent 2025 Morningstar Investment Conference, CEO Kunal Kapoor highlighted a growing trend that is reshaping the investment landscape: the accelerating convergence of public and private markets.

In his keynote, Kapoor underscored the challenges and opportunities this shift creates for financial advisors, particularly around access, transparency, and product complexity.

Private Markets Move Mainstream

Investor interest in private assets is no longer confined to institutions.

"Public markets have been a trusted path and will remain a trusted path for capital formation, investor returns, and long-term retirement planning,” said Kapoor. “But we know from our Voice of the Investor study that 20%, 25% of retail investors in some way are interested in private equity or are thinking about it.”

Much of this interest is driven by broader exposure. As more Americans work for companies backed by private capital, demand for access to similar investments is rising.

The backdrop is structural. Over the last two decades, the number of public companies in the U.S. has dropped, while PE- and VC-backed firms have ballooned from fewer than 9,000 to roughly 75,000. Companies are raising more capital privately and staying off public exchanges longer, often indefinitely.

Private Credit, Not Just Private Equity

While private equity draws the headlines, Kapoor pointed to private credit as the area where most near-term advisor opportunities lie. U.S. private debt has grown to more than $1.2 trillion in assets under management. Large firms such as Blackstone and Apollo are increasingly active in direct lending, distressed debt, and mezzanine finance.

This growth has fueled a resurgence in interval funds (semiliquid vehicles designed to give individual investors exposure to private credit).

"In the past five years, we’ve had more launches in the space than in the preceding 27 years,” said Kapoor. “And in 2025, we’re already on pace for a record year for new launches."

Advisors Face Complexity & Friction

Despite the growing interest, many advisors remain cautious. Morningstar research finds that only a third are currently offering private market strategies. The biggest barrier is complexity. Compared to public vehicles, private funds come with higher fees, limited liquidity, and reduced transparency.

This hesitation presents a challenge and an opportunity. According to Kapoor, Morningstar is working to close the gap by extending its data, ratings, and analytics capabilities to private markets. The firm’s goal: to apply the same rigor to private investments that it has long brought to public funds.

Transparency & Trade-Offs

While some private funds offer attractive yields, many use leverage and carry incentive fees applied to total return, not just above a hurdle rate. These details can meaningfully affect outcomes and are often overlooked in marketing materials.

Morningstar aims to expose such nuances. A recent study found that semiliquid funds are charging fees more than three times higher than traditional mutual funds and ETFs. Advisors are being urged to look beyond yields and consider the structure, liquidity terms, and risk profile of these vehicles.

Market in Transition

The convergence of public and private markets is no longer theoretical — it's happening. And advisors will be on the frontlines of helping clients understand the trade-offs.

For Morningstar, the mission remains consistent: Provide the data, ratings, and tools that allow advisors to evaluate private investments with the same discipline applied to public markets.

Morningstar’s strategy is built around four pillars:

Actionable data: Through PitchBook, it tracks more than 6 million private companies and 400,000 debt deals.
Standardized analytics: New tools allow advisors to see what percentage of a fund’s holdings are in private markets.
Independent research: The firm is expanding its Medalist ratings to include semiliquid funds.
Integrated technology: Its Direct Advisory Suite now includes data on more than 1,000 private capital funds.

Common Framework for Private & Public Investing

Morningstar is working to establish a standardized framework to help advisors assess and communicate the trade-offs between public and private assets. As private markets gain wider traction in client portfolios, such a framework becomes increasingly important.

Advisors should expect a wave of new products and marketing efforts tied to private capital. Kapoor urged the audience to approach these developments with healthy skepticism.

As the line between public and private markets continues to blur, the core principles of sound portfolio construction remain unchanged: transparent analysis, thoughtful allocation, and client-first advice.

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