Public and Private Convergence: What’s in Store for Private Markets in 2026

The number of publicly traded companies in the US declined from around 7,000 in 1998 to just over 4,000 today. Meanwhile, more than 1,450 private companies have achieved the coveted “unicorn” status, with valuations in excess of $1 billion. It’s no wonder then that private markets are very much in vogue, as more retail investors seek access. 

This demand is reflected in the data. PitchBook research shows that the global pool of private capital is in the neighborhood of $16 trillion, with $4 trillion of that total figure classed as “dry powder”. Morningstar strategist Dan Lefkovitz says, it’s “now common for institutional asset owners to allocate 15%, 20%, or even 30% of their portfolios to private market investments.”  Despite private markets’ growing prominence, caveat emptor still applies. Private market funds are known for high fees, illiquidity, and opacity, and their prospective diversification and performance benefits can often be exaggerated. 

What’s in store for private markets in 2026?  

In the United States, private equity  exits will continue at a slower pace compared to five years ago, according to research from PitchBook. The big will continue to get bigger. Manager consolidation will drive the top ten funds to capture over 40% of private equity fundraising, while platform leveraged buyouts are expected to see their share of total deal activity increase to 25% or more.  

Overall, the sentiment is one of cautious optimism, as markets weigh economic headwinds against AI-driven risks and opportunities. 

Meanwhile, in Europe, the ratio of private equity-backed companies versus public companies is expected to hit a record of 2.3x. Europe’s IPO window is predicted to stay open, with mostly profitable listings making their public debuts. Stockholm will challenge London, Paris, and Berlin, the big three private market hubs in Europe. Artificial intelligence is forecast to account for more than half of European VC deal value. In the Middle East, Saudi private capital markets will continue developing.  

Compared to the US, EMEA private markets have a decidedly more positive outlook for 2026. 

Heading into 2026, Morningstar DBRS’ outlook for private credit quality trends remains negative. Operating results for corporate middle market borrowers reviewed in 2025 show an increase in margin compression from a year ago, while leverage has increased materially, driven by lower base rates and an uptick in acquisition activity among higher-rated borrowers.  

Similar to private equity, the private credit landscape appears stronger in EMEA. Despite an acceleration in debt growth among European borrowers, credit quality among EMEA-based borrowers is better positioned compared to US borrowers. The US faces a greater degree of margin compression, mitigating the positive effect from recent base interest rate reductions. European borrower results reflect relatively stable cash flow metrics and improved interest coverage ratios. 

Laura Lutton, Morningstar’s global head of manager research, notes that assets in semiliquid funds have skyrocketed in the last decade. For example, US-domiciled interval funds grew from $2.8 billion to $96.2 billion, while 70 new funds were launched in the past two years. 

Semiliquid funds hold private securities but are registered with regulators and required to disclose their holdings, fees, and performance. They’re available in different structures, including tender-offer funds, nontraded business development companies (BDCs), nontraded real estate investment trusts (REITs), accredited investor funds, European long-term investment funds (ELTIFs), and long-term asset funds (LTAFs). 

Interval funds were first proposed by the United States Securities and Exchange Commission in 1992, just one year before the launch of the first American ETF. In the 2010s and 2020s, traditional and alternative asset managers seized on interval funds as the preferred vehicle to offer private assets to regular advisors and investors. Of the 93 interval funds launched since 2019, almost all have offered investors access to private markets, usually private credit. Importantly, interval funds navigate the SEC’s illiquid holding cap by limiting shareholder redemptions. They must offer investors at least one chance per year to sell 5% to 25% of outstanding shares, but many offer more frequent redemption windows—typically quarterly. 

Looking ahead to 2026, interval funds—and private markets more generally—are focusing on liquidity. PitchBook research shows interval fund assets have nearly doubled in the past three years, with total net assets standing at $126.4 billion as of late 2025. Interval funds have absorbed around $53 billion in cumulative redemptions since September 2020, indicating that inflows and the liquidity mechanism are functioning effectively on a systemic level. However, liquidity stress on individual funds may still be lurking beneath the surface. 

European long-term investment funds, or ELTIFs, were first devised in 2015 and celebrated as the next step toward democratizing access to private assets for European investors. Fast forward to 2024, and sweeping regulatory changes led to ELTIFs 2.0, accelerating the development of new products.  

Like interval funds, ELTIFs grant retail investors and advisors access to strategies that were historically available to institutional investors and high-net-worth individuals.  With ELTIFs 2.0, the European Union reduced the minimum exposure to illiquid assets from 70% to 55%, allowing the possibility of “evergreen” ELTIFs, which are essentially open-ended and built to accommodate ongoing, though limited, in- and outflows.   

But while product development has picked up, it has also muddied the waters of what investors can expect when investing in an ELTIF.   

In the UK, 2026 marks the first time that long-term asset funds, or LTAFs, can be included in stocks & shares ISAs. This has the potential to turbocharge LTAFs’ AUM growth via retail channels, which should, in theory, lead to some progress in terms of platform availability of LTAFs.  

First introduced in 2021, LTAFs are open-end funds that enable investments in illiquid private assets. They are evergreen vehicles authorized by the Financial Conduct Authority and are available to a wider investor base than traditional private market investments. Their introduction marked an important step in providing access to long-term, illiquid private assets to defined-contribution pension schemes and private wealth clients. 

Morningstar data shows the current AUM of FCA-approved LTAFs sits at around £5 billion, with an additional £3 billion in committed capital. But the LTAF market itself is still immature, with around 20 strategies for sale in the UK, though this figure is expected to increase. Because of their complex nature, the LTAF market is currently dominated by a few large-scale asset managers hoping to capture market share, including Schroders, Aviva, BlackRock, and Fidelity. 

With private investments now accessible to a broader range of investors, the demand for transparent, data-driven insights has never been higher, and the need for transparency and analytical tools is critical. 

That’s why we’ve expanded our semiliquid fund coverage, from interval funds, tender offer funds, and unlisted REITs to unlisted BDCs, ELTIFs, and LTAFs. We’ve also launched the Morningstar Medalist Rating for Semiliquid Funds, available in Morningstar Direct.  

The result is a clear fund rating that turns noise into signal, brings clarity and confidence to a complex space, and empowers investor success. Alongside our ratings, we’ve also launched the Morningstar PitchBook Evergreen Fund Indexes, a standardized, rules-based approach to measuring the performance of US-registered, unlisted semiliquid funds, bringing transparency and structure to a complex and fast-growing segment of the private markets.