Public and Private Equity Together: What the MSCI All Country Public + Private Equity Index Reveals

Matthew Griffith, Head of Investment Oversight, Channel Capital

In December 2025, MSCI launched a new index, the MSCI All Country Public + Private Equity Index (a USD index), which combines both listed market and private market equities into a single, daily-priced index. This index utilises MSCI’s extensive index construction capabilities and its significant private markets database. This index is relevant for investors who have integrated their public and private equity exposures by providing a single way to measure equity asset class performance.

To the author’s knowledge, this is the first index of its kind.

It raises the question of whether this new index is part of a larger story of a potential “new way” for constructing equity portfolios and evaluating performance of the same. In addition, an area of ongoing interest for investors (and regulators) is MSCI’s approach to estimating private equity valuations on a daily basis, which seeks to overcome the challenge of lagged private equity valuations. This article seeks to explore these issues in more detail.

How does the new MSCI All Country Public + Private Equity Index work?

In summary, the main characteristics of the new index are as follows:

• 85% public equities: Based on the MSCI All Countries World Investable Market Index (ACWI IMI) which captures the performance of listed equities. This index captures ~99% of the investable universe and in contrast to some of the other developed market global equity indices, the ACWI IMI also captures emerging markets and small caps.
• 15% private equities: Based on the MSCI All Country Private Equity Index which captures the performance of MSCI’s private equity database of ~10,000 funds. The index aims to overcome traditional lagged valuations in private equity by striking a daily estimate. In short, this estimate appears to be derived by:
  - MSCI’s view of the relationships between private and public markets (e.g. private equity captures a % of the move in public equities);
  - Making an adjustment to reflect the sector and country differences between the public and private equity universes;
  - Making an adjustment for leverage; and
  - Applying a smoothing factor to reflect that private equity valuations are slower moving relative to listed markets.

What is the big picture which has given rise to this new index?

There are arguably four forces driving investor behaviour with respect to overall equity portfolio construction and performance measurement:

1. Index concentration in public markets is causing challenges with respect to asset class diversification;
2. Growth in public company listings has stalled (or declined) in some of the world’s most significant equity markets;  
3. Companies are staying private for longer and the asset class has grown in size and breadth. As a result, a significant amount of value creation is occurring outside of public markets.
4. Entities seeking capital now have both private and public markets as viable options for sourcing of capital.

As a result of the above, public equity markets are potentially a narrower expression of equity exposure than they once were. Portfolio constructors are arguably being forced to cast a wider net for accessing the equity risk premium and equity alpha. Hence, as MSCI notes, some investors are looking to aggregate their public and private market equity exposures.

What are the current approaches to constructing and benchmarking equity exposures?

Currently, the main approach to capturing an equity exposure involves separating the asset class into a public sleeve and a private sleeve.  

Public Equities

• This sleeve involves building an exposure which includes developed market (DM) and emerging market equities (EM), across the market cap spectrum (core/large, small/mid), diversified by factor/style (e.g. value vs growth) and alpha sources (quant vs fundamental).
• The asset class is typically benchmarked to an appropriate representative benchmark with a large and mid-cap bias using a market cap weighted approach.
• In some cases, some investors will separate DM and EM exposures into their own sub-asset classes with their own representative benchmarks.

Private Equities

• This sleeve is typically constructed to capture opportunities across countries, sectors and developmental life cycle (ranging from early-stage venture capital, growth, and large cap buyouts). Typically, portfolios will have exposure to a range of managers with different areas of focus and sector specialties. Portfolios will typically have a US bias, with the next largest exposure to Europe. Some investors will add selective “satellite” exposures focused on regions (e.g. Asia) or market sectors (e.g. software, or European early-stage venture capital).
• Typically, a private equity asset class will be benchmarked using a combination of:
  - An “absolute return” benchmark. E.g. 10-12%+ p.a., or cash + 8%.
  - A “listed equities + x%” benchmark. E.g. MSCI World + 3%.  
  - A representative benchmark. These benchmarks seek to capture the returns of a group of private equity funds, with varying vintages, geographic exposures, and styles. Some of the more well-known benchmark providers for private equity include Burgiss (MSCI), Cambridge, Preqin. Pitchbook, and State Street.

Why comparing private equity to public markets isn’t straightforward

Benchmarking private equity is notoriously challenging and as such, it has been historically difficult to directly compare or blend private and public equity returns. In addition, investors and regulators have an increasing interest and focus on how to obtain improved transparency and frequency with respect to unlisted valuations.

Investors are inevitably left with the choice of using a private equity representative benchmark to compare to public equities. However, this isn’t easy. Four of the key issues for private equity representative benchmarks and their ability to blend or compare with listed market benchmarks relate to:

1. The lagged valuation basis of private equity where underlying portfolio companies are infrequently valued (by up to 12 months) versus publicly listed companies which have daily market pricing.
2. Returns for private equity are typically expressed as an Internal Rate of Return (IRR) (money weighted basis) as opposed to price-on-price returns (time-weighted basis) used in listed equity performance measurement.  
3. Unlike listed equities, for there is no “investable” universe and as such, representative indices for private equity are specialised and have inherent limitations for performance measurement for private equity portfolios. E.g. there can be material differences in terms of country, vintage, leverage, sector and market cap differences.
4. Private equity can be highly idiosyncratic making it difficult to estimate reliable relationships with frequently observable factors (e.g. listed equities).

As a result of the above, there are limits on the ability to compare private and public equity market returns.

Is MSCI’s new index the panacea for performance benchmarking and analysis?

While the new index is conceptually appealing, the devil is in the detail and for now at least, widespread adoption and applicability for this new index is limited. The main issues are:

• Static 15% private equity weight: Most investors do not maintain a fixed 15% allocation to private equity within an overall equity mix. For example, a typical Balanced fund can allocate anywhere between 40–60% to public equities and 5–15% to private equity, where these weights can vary over time. A benchmark assuming a static 15% private equity weight can misalign with actual portfolio structures, creating performance comparison issues.
• Loss of illiquidity premium tracking: Investors expect private equity to deliver a ~3% premium over public markets. Combining both into one index removes the ability to isolate and verify whether private equity is achieving a premium relative to public markets to justify the time, cost and illiquidity.
• Reliance on ‘nowcasting’ valuation: The new index uses modelled valuations based on assumed relationships between private and public markets. These correlations can break down, particularly during market stress or dislocation, introducing model risk and reducing confidence in reported returns. While nowcasting improves timeliness, it is based on assumptions which can deviate from reality.
• Industry practice: Most performance databases, peer comparisons, and consultant frameworks still treat public and private equity separately.

Conclusion

The MSCI’s Public + Private Equity Index has applicability for investors who’ve aggregated their private equity and public market exposures into a single asset class where the portfolio construction broadly aligns to the index design. However, while the new index aligns with the concept of a more unified equity continuum, practical challenges - such as potential for misaligned private equity benchmark relative weights, loss of visibility of any private equity premium (or lack thereof) relative to public markets, reliance on modelled valuations, and widespread practice of maintaining separate public and private market asset classes – all make widespread adoption unlikely in the near term.

MSCI’s approach for creating estimates of daily returns for private equity has relevance for valuation approaches for unlisted asset classes in general. The approach to valuing private equity on a daily basis using a proxy estimation is noteworthy. However, further evidence and research is required to determine the validity of this approach as a reliable method to create valuation estimates in the absence of more frequent valuations. This is an area of ongoing interest for many industry practitioners and requires further monitoring.

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