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Increasing demand from investors for private equity has been significant, with the industry growing more than 500% since 2000, valued at over $3trn in 2019. This has corresponded with changing dynamics in how companies are raising capital.

Liang Yin, Senior Investment Consultant at the Thinking Ahead Group, said: "Today's knowledge-based business models tend to be asset light and having a significant proportion of investment in intangible assets acts as a drag on earnings. In addition, regulatory pressure and the rising ongoing costs of being a listed company have led more businesses to raise capital from private markets, where there is an abundance of available capital."

Firms have also been incentivised by the longer timescales for returns that exist in private markets. Even General Partners' (GPs) five to seven-year cycles are preferable to the pressure of quarterly reporting demanded by public markets.

"As a result, public market investors are now accessing companies at a later stage of their development than in the past. When these companies list publicly, they emerge as mature and large companies, which can lead to public market investors missing out on significant growth opportunities and reduce the attractiveness of such investments."

The Thinking Ahead Institute research provides four possible opportunities for investors to access the private equity market:

1. Relying on companies in an existing public equity portfolio to acquire young and growing private companies via acquisitions

2. Invest in private equity or venture capital funds.

3. Co-invest: a private equity fund (GP) invites a fund investor to co-invest in a specific company.

4. Direct investment: asset owners bypass specialised private equity funds completely and invest in private companies.

Liang Yin said: "Companies are no longer using public markets in the same way to raise capital. The decision to list is increasingly driven by the desire to cash out and that normally happens when businesses reach a scale so large that only the public market provides enough liquidity to allow many of the early investors to cash out at the same time.

"At the same time, private equity investment is believed to be increasingly important in institutional portfolios of tomorrow, but wider participation requires innovations on how to access it beyond the current 'playbook'. Will a passive direct investing model emerge to disrupt the private equity investing model as it has done for the public markets? An asset owner can supply capital directly and hold assets indefinitely with no leverage and no desire to 'rock the boat'.

"Technology may well drive evolution in this space. It's possible that crowdfunding platforms that already exist to connect businesses and investors in private markets could evolve to become the new private stock exchanges or even utilise the benefits of fractional ownership offered by blockchain technology to open up investment in private markets to a new segment of the investor community. Whichever path firms choose to follow in the future, the private equity market looks likely to form a bigger part of the institutional landscape going forward."