Morningstar PitchBook index tracks exposure to public and private assets
Investors are increasingly looking for ways to gain exposure to both private and public markets, leading investment research company Morningstar to introduce a new benchmark called the Morningstar PitchBook US Modern Market 100 Index, or the Modern Market 100. This index aims to reflect the changing landscape of the modern asset universe by combining 90 public companies with 10 venture-backed companies.
Sanjay Arya, head of innovation at Morningstar, highlighted the importance of including private companies in the index, noting that many innovative and dynamic companies are choosing to stay private for longer periods due to the ability to raise capital without going public. While the public stock market is valued at around $60 trillion, the private equity market sits at approximately $8 trillion, indicating the growing significance of private companies in the economy.
The decision to include private assets in the benchmark comes at a time when alternative asset managers are gaining traction, with President Donald Trump recently signing an executive order allowing alternative assets to be included in 401(k) plans. Additionally, crossover investors such as sovereign wealth funds and hedge funds have been increasingly involved in private market transactions, totaling $450 billion since 2021.
Developing the Modern Market 100 index presented challenges for Morningstar, as pricing private assets can be complex. The team utilized secondary trading platforms to aggregate pricing transaction data and implemented liquidity screens, quarterly rebalances, and daily calculations to ensure the index’s accuracy.
The index focuses on companies with higher risk profiles, particularly in the tech sector, with top public constituents including Microsoft, Nvidia, Apple, Amazon, and Meta Platforms. The top private constituents feature growth companies like SpaceX, OpenAI, xAI, and Stripe. Despite the inherent risk, the index has shown strong performance, with a 1-year return of 28.2% compared to the S&P 500’s 20% increase over the same period.
Arya emphasized the importance of tracking innovative companies like OpenAI, which may not be represented in traditional benchmarks. By including these companies, the Modern Market 100 provides a more comprehensive view of the economy and offers valuable insights for investors looking to capitalize on the evolving market landscape.
Overall, the Modern Market 100 index represents a new way for investors to access a diverse range of opportunities across both public and private markets, reflecting the changing dynamics of the modern asset universe.
