The superpower of public equity

Financial Times UK

11 Jul 2026

Robert Buckland Robert Buckland is senior adviser at Engine AI and Invest a, and former chief global equity strategist at Citigroup

Investors have been attracted to private markets by higher expected returns and

lower reported volatility, but it’s often hard to get your money out. This implicit

liquidity sacrifice has reached its limi

For much of the 1980 sand 1990s, public equity markets seemed unbeatable. They

offered investors strong returns and generous liquidity. They offered companies

cheap capital and a powerful acquisition currency. Equitisation was everywhere.

Governments privatised. Mutuals de mutual is ed. Companies rushed to IP O. No

other asset class could compete.

Then came the 2000-03 bear market. Investors discovered that liquidity had a down

side. With asset prices continuously marked-to-market, losses were pain fully visible. Pension funds, insurance companies, retail investors and regulators were scar

red by this experience. The search for lower-volatility assets had begun.

One alternative was bonds. Another was private assets, which offered the attractive

combination of high expected returns and smoothed reported performance. No

horrible mark-to-markets wings here. The down side was lower liquidity. It’ s hard

to get your money out, but that was a sacrifice many investors were willing to ma

to avoid the tyranny of daily portfolio pricing.

Fast-growing young technology firms found that they could fund continued expansion without resorting to an IPO. No need to accept the burden some disclosu

requirements and volatility of public equity markets.

More mature public companies were de listed by traditional private equity (ie nonVC) funds. Balance sheets were geared up using cheap debt. Dividend recapitalisations allowed sponsors to extract cash to return to their investors. In the zero-rate

era, leverage became a partial substitute for liquidity.

Meanwhile, public equity markets were changing. Passive funds enjoyed enormous

in flows. They usually avoid IP Os, instead waiting until companies become big a

mature enough to enter the large-cap benchmarks that they track.

Public equity markets increasingly became ware houses for giant older companies,

not green houses for younger ones. Traditional mid-cap IP Os withered alongside

the active managers who historically financed the

Wall Street always follows the money. A cost-obsessed passive equity fund offers

fewer revenue opportunities than a private equity or venture capital fund charging

management fees plus carried interest. Investors sacrificed public equity liquidi

in exchange for private equity’ s higher expected returns and smooth er marks.

Unlisted companies stayed unlisted for longer. Private markets grew while public

markets shrank.

But it seems that this private market model maybe hitting its limits. On the primary

side, the capital requirements of the AI boom look too big, even for the VC mega

funds. On the secondary side, investors are becoming more aware of liquidity limitations outside public markets. They might want to get their money out of ageing

private equity portfolios, but often can’ t.

The industry has come up with clever ways to help, including secondary sales and

continuation funds. But these smell of financial engineering, are littered with conflicts of interest and require continued net in flows to be sustai

It seems that liquidity is desirable again. Only public markets can deliver primary

liquidity to Space X, Anthropic and Open AI while also delivering secondary liquidity to their shareholders. They stayed private for as long as they could, but these

latest block buster IP Os were inevitable.

A public listing also makes their shares more attractive as an acquisition currency

— SpaceX has already announced an all-share deal for AI coding start-up Cursor.

At last, public equity investors are being presented with a new supply of large-cap

US techs tocks. Even IPO-resistant passive funds are getting involved as their index

providers accelerate the inclusion of these new listings. Public groups are also tap

ping the public markets, with Alphabet issuing its first shares in two decade

But this precious liquidity is not available to all. For the more mature mid-cap companies pi ling up in private equity portfolios, the IP O market remains dorm ant. Of

course, there is always a level where the public market is willing to buy, but that

remains well below the levels where PE funds are willing( or can afford) to sell.

And don’ t forget that this liquidity super power comes at a price. Shares prices go

up or down everyday. Private investors are just about to re discover that reality