Key Takeaways
- • Neuberger Berman argues that private markets strengthen portfolio construction across five themes, including diversification, the growing private company universe, performance, exits, and AI adoption.
- • U.S. public companies fell from roughly 8,000 in 2000 to 5,500, while PE-owned companies grew from under 2,000 to more than 13,000.
- • Pooled private equity returns trailed the S&P 500 over five and 10 years, but top-quartile managers continued to outperform public markets, and buyout returns compounded in the mid-teens over five and 10 years.
- • The top 10 S&P 500 companies comprise 38% of the index's market capitalization, up from 16% in 1990, and generated about 53% of its year-to-date performance.
- • 2025 saw more than 4,000 company exits worth a combined $1.3 trillion, though Neuberger expects distributions to settle in the high teens rather than the 23.4% long-run average.
- • In a 2025 survey of Neuberger's GP partners, 90% said portfolio companies were meeting or exceeding AI margin expectations, and 71% said the same for AI-driven revenue growth.
Summary
Neuberger Berman makes the case that investors should maintain or increase private markets allocations, citing five themes it believes strengthen portfolio construction. The firm argues private equity offers a different opportunity set from public markets. According to Neuberger, the median market capitalization is roughly $44 billion for the S&P 500, $1.2 billion for the Russell 2000, and a little over $300 million for the global private equity market. It describes these as small, fast-growing companies in industries and geographies that are inaccessible or lightly represented publicly.
Neuberger also notes that companies are staying private longer because of abundant private funding. Since 2000, the number of U.S. public companies has fallen from roughly 8,000 to 5,500, while private equity-owned companies have grown from under 2,000 to more than 13,000, which the firm says means limiting portfolios to public markets excludes a growing share of the opportunity set.
On performance, Neuberger acknowledges that pooled private equity returns trailed the S&P 500 over five- and 10-year horizons, while top-quartile managers continued to outperform. European buyout returns outperformed the MSCI Europe Index over five, 10 and 20 years, according to the firm. Globally, buyout returns compounded in the mid-teens over five and 10 years, including the 2021 vintage. The firm points to the wide gap between average and top-quartile returns as evidence of the value of manager selection. It also highlights market concentration: the top 10 S&P 500 companies make up 38% of index market capitalization and drove about 53% of year-to-date performance, and most major banks expect consensus 10-year public returns of 5% to 7%.
On exits, Neuberger says the negative headlines reflect a backlog from 2022 through 2024. In 2025, more than 4,000 companies exited at a combined value of about $1.3 trillion. Cash distributions averaged 23.4% of total portfolio value since 2007, fell to 11% to 12% during the difficult stretch, and have recovered to just above 15%. The firm expects holding periods of five to six years, which it believes could return distributions to the high teens rather than the historical average. It favors managers who generate returns through earnings growth rather than multiple expansion.
Finally, Neuberger cites a 2025 survey of its GP partners in which 90% said portfolio companies were meeting or exceeding expectations for AI-driven margin and cost gains, and 71% said the same for AI-driven revenue growth. The firm argues that sponsor scale allows AI investment that smaller companies often cannot afford. The conclusion frames private capital as more mature and accountable, with returns rewarding careful manager selection.
Neuberger also notes that companies are staying private longer because of abundant private funding. Since 2000, the number of U.S. public companies has fallen from roughly 8,000 to 5,500, while private equity-owned companies have grown from under 2,000 to more than 13,000, which the firm says means limiting portfolios to public markets excludes a growing share of the opportunity set.
On performance, Neuberger acknowledges that pooled private equity returns trailed the S&P 500 over five- and 10-year horizons, while top-quartile managers continued to outperform. European buyout returns outperformed the MSCI Europe Index over five, 10 and 20 years, according to the firm. Globally, buyout returns compounded in the mid-teens over five and 10 years, including the 2021 vintage. The firm points to the wide gap between average and top-quartile returns as evidence of the value of manager selection. It also highlights market concentration: the top 10 S&P 500 companies make up 38% of index market capitalization and drove about 53% of year-to-date performance, and most major banks expect consensus 10-year public returns of 5% to 7%.
On exits, Neuberger says the negative headlines reflect a backlog from 2022 through 2024. In 2025, more than 4,000 companies exited at a combined value of about $1.3 trillion. Cash distributions averaged 23.4% of total portfolio value since 2007, fell to 11% to 12% during the difficult stretch, and have recovered to just above 15%. The firm expects holding periods of five to six years, which it believes could return distributions to the high teens rather than the historical average. It favors managers who generate returns through earnings growth rather than multiple expansion.
Finally, Neuberger cites a 2025 survey of its GP partners in which 90% said portfolio companies were meeting or exceeding expectations for AI-driven margin and cost gains, and 71% said the same for AI-driven revenue growth. The firm argues that sponsor scale allows AI investment that smaller companies often cannot afford. The conclusion frames private capital as more mature and accountable, with returns rewarding careful manager selection.
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