Dealers work on August 14, 2025 at the New York Stock Exchange (NYSE) in New York City, USA.
Brendan McDermid | Reuters
With the desire to have a private market entry and listed stocks that are obtained from investors to investors, Morningstar has developed a benchmark to reflect the trend.
The Morningstar PitchBook US Modern Market 100 Index or the Modern Market 100 is the first to combine public and private equity engagement in an index, the Investment Research Company announced on Wednesday. The benchmark is to capture the performance of 100 of the largest US companies that were divided into 90 public companies and 10 companies, the company said.
The 90/10 shimmer should reflect what Morningstar sees as the modern asset universe that is expanding in private markets, and companies such as Openaai and Stripe can stay private longer.
“Companies do not feel the urge to go to the stock exchange because they can raise a lot of capital”, Sanjay Arya, Head of Innovation, index products at Morningstar. “To ignore them, I think they miss some of the fastest and most dynamic companies out there.”
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The private equity universe is put in the shade by the value of public companies. The US public stock market has a value of around 60 trillion US dollars, while the US private -equity universe is about 8 trillion dollars, said Arya. However, private companies may be able to reflect where the economy leads.
“The indices should give them an indication of what the economy is, or the market mood or in the people in which investors should look for opportunities,” said Arya. “And you cannot do that alone in public markets if a large part of it is outside the public markets.”
The trend can become even more pronounced. Alternative asset managers achieved a big victory this summer after President Donald Trump signed an executive order in August, in which the way for alternative assets in 401 (K) s was deleted.
However, engagement in private assets has grown for years. According to Morningstar, crossover investors, including sovereign assets, private -equity -Buyout companies and hedge funds, have been involved in around 5,000 private market transactions of a total of 450 billion US dollars since 2021. Arya hopes that the modern market 100 will give investors a framework for the benchmark performance in both assets.
However, it is not without challenges. The work started about four years ago, said Arya and explained that the company had to develop a public private benchmark in view of the challenge in pricing for private assets. He said his team had rely on secondary trading platforms such as caplight and Zanbato to aggregate winning ratio data. The index also uses liquidity screens, quarterly rebalances and daily calculations.
More risk
The index also follows companies more risk by nature because they prefer the largest CAP company that tend to be distorted to Big Tech. The ten best public voters in the modern market index include MicrosoftPresent NvidiaPresent ApplePresent Amazon And Meta platforms. The top 10 private voters include SpaceX, Openai, Xai and Stripe.
In other words, there is a preference for growth companies with inherent risk. This could mean that the index is susceptible to a withdrawal when the technology sector is faltering – especially at a moment when many investors fear that the megakaps will be rated for perfection.
On the other hand, this could mean that the benchmark is ready to capture more outperformance. In a white paper, Morningstar showed that the 1-year return for the modern market index is 28.2%. During the same period, the S&P 500 rose by 20%.
According to Arya, the index investor enables a completely different chance to be pursued than in important benchmarks. After all, Openai, a company that is said to have a value of 500 billion US dollars, is larger than Exxon Mobil, Palantir or Procter & Gamble, and yet it is a name that most investors have little engagement in their portfolios.
He found that the benchmarks have developed over time to better reflect the drivers of economic growth, from the railway companies, which defined the industrial average of Dow Jones at the beginning of the late 19th century until today's innovation economy.
“We have this large component of the innovation economy and unable to fully grasp this, which is usually still correct in the past venture area. I think it only offers a more comprehensive picture.” Said Arya.
“This actually helps them to understand how these contours somehow shift over time,” he continued. “I think investors offer great insights.”