An Introduction to Morningstar Private Market Indexes and Their Utility for Retail Investors
Executive Summary
Private markets—comprising private equity, private credit, venture capital, and real assets—have long been the domain of institutional investors. Historically, high minimum investment requirements, limited transparency, and illiquidity have restricted access for retail investors. However, as private markets continue to expand and democratization accelerates, reliable benchmarks are becoming essential for measuring performance and managing risk.
Morningstar, a global leader in investment research and data, has developed a suite of Private Market Indexes to address this need. These indexes aim to provide transparency, comparability, and performance insights similar to those available in public markets. This paper introduces the structure, methodology, and applications of Morningstar’s Private Market Indexes (PMIs), and explores how retail investors can utilize them to make more informed investment decisions.
1. The Rise of Private Markets
Over the past two decades, private markets have grown rapidly, outpacing public markets in both size and innovation. According to industry data, global private market assets under management (AUM) surpassed $13 trillion in 2024, driven by investor demand for diversification and enhanced returns.
Key trends include:
Institutional dominance: Pension funds, endowments, and sovereign wealth funds have traditionally been the main participants.
Retail democratization: The emergence of interval funds, tender-offer funds, and tokenized private assets is opening access to individual investors.
Need for benchmarking: As more investors gain exposure, standardized performance measures become critical for evaluation and portfolio construction.
2. Morningstar’s Role in Private Market Benchmarking
Morningstar has long been recognized for its robust data analytics and transparent methodologies in public market indexing. Extending these principles to private markets, Morningstar’s Private Market Indexes are designed to:
Capture aggregate performance across private equity, private credit, and venture capital.
Provide consistent valuation methodologies to align with public market standards.
Offer comparable risk-return metrics for portfolio analysis and asset allocation.
The indexes leverage data from PitchBook, a Morningstar subsidiary and a leading private market data provider. This integration allows for a comprehensive view of private market performance using high-quality deal-level and fund-level data.
3. Methodology Overview
Morningstar’s Private Market Indexes employ a cash flow–based, time-weighted methodology that adjusts for the irregular nature of private investment cash flows. The approach includes:
Data Source: Fund-level cash flows and valuations collected from thousands of private capital funds globally.
Valuation Frequency: Quarterly updates, reflecting the typical reporting cadence of private funds.
Performance Calculation: Modified internal rate of return (IRR) and public market equivalent (PME) techniques to align private returns with public benchmarks.
Index Construction: Weighted by net asset value (NAV) to represent the aggregate performance of the underlying funds.
This methodology ensures that the indexes reflect both realized and unrealized gains, providing a realistic measure of investor experience in private markets.
4. Key Index Families
Morningstar’s Private Market Index suite includes several major categories:
Morningstar PitchBook Private Equity Index (MPPEI): Tracks global buyout and growth equity performance.
Morningstar PitchBook Venture Capital Index (MPVCI): Measures venture capital returns across stages and geographies.
Morningstar PitchBook Private Credit Index (MPPCI): Captures returns from direct lending, mezzanine, and distressed debt strategies.
Regional and Sectoral Sub-Indexes: Enable granular analysis by geography, industry, or strategy type.
Each index provides historical performance data, volatility measures, and drawdown statistics, facilitating comparison with public benchmarks like the S&P 500 or Bloomberg Barclays Aggregate Bond Index.
5. Utility for Retail Investors
While retail investors typically cannot invest directly in the funds underlying these indexes, the benchmarks offer several valuable applications:
a. Performance Benchmarking
Retail investors participating in semi-liquid private market vehicles (e.g., interval funds or feeder funds) can use the indexes to gauge whether their returns align with broader market trends.
b. Asset Allocation and Diversification
By comparing private market indexes with public equity and fixed income benchmarks, investors can estimate potential diversification benefits and risk-adjusted returns.
c. Risk Assessment
Index volatility and drawdown data provide insights into the risk characteristics of private assets over time, helping investors set realistic expectations.
d. Education and Transparency
For newcomers to private markets, these indexes serve as educational tools, offering a clearer picture of historical performance patterns and cyclicality.
6. Challenges and Considerations
Despite their utility, private market indexes face inherent limitations:
Lag in reporting: Quarterly valuations introduce time lags compared to daily public market data.
Survivorship bias: Data availability may skew toward successful funds.
Illiquidity effects: Indexes cannot fully capture liquidity risk or redemption constraints faced by investors.
Morningstar’s ongoing efforts to refine methodologies and expand data coverage aim to mitigate these challenges and enhance representativeness.
7. The Future of Private Market Benchmarking
As private market access products for retail investors proliferate, the need for transparent and reliable benchmarks will grow. Morningstar’s Private Market Indexes are positioned to become the industry standard for:
Portfolio construction frameworks incorporating private assets.
Risk modeling and scenario analysis across asset classes.
Product development for financial advisors and fintech platforms.
In the long term, integration with digital platforms and tokenized investment vehicles may further enhance accessibility and real-time performance tracking.
Conclusion
Morningstar’s Private Market Indexes mark a pivotal step toward greater transparency and inclusivity in private markets. For retail investors, they offer a critical bridge between opaque alternative assets and the data-driven decision-making tools common in public markets.
As private markets continue to evolve, these indexes will play a central role in benchmarking performance, assessing risk, and empowering a new generation of investors to participate confidently in the private capital ecosystem.
References
Morningstar PitchBook Private Market Indexes Methodology (Morningstar, 2024)
PitchBook Data, Inc. – Global Private Market Performance Database
Morningstar Research Reports on Private Market Benchmarks (2023–2025)
Preqin and Bain & Co. Global Private Equity Reports (2024)
