4 Reasons for a Resurgence in Growth Equity
Growth equity – investments in mid- to late-stage private companies – is regaining momentum after several years of subdued returns since 2021. Today, it presents a compelling opportunity for investors, driven by several key factors:
1. Value Creation in Private Markets
Companies are staying private longer, generating significant value outside public markets. This is due to:
• Abundant private capital: Global private equity assets have grown over 15% annually in the past decade and are expected to double, reaching $25 trillion in the next 10 years.
• Avoidance of public market pressures: Innovators prefer private markets to escape the short-term focus and regulatory burdens of public listings.
• Diverse exit options: About 60% of U.S. VC exits occur via buyouts and acquisitions, with secondary markets maturing and more deals including secondary components.
2. Technological Innovation and the AI Revolution
The pace of innovation, especially in artificial intelligence, is unprecedented. Most value in previous tech cycles accrued in public markets, but now, with about 95% of software companies remaining private and IPOs happening later, much of the value is created privately. AI’s impact is broad, spanning agentic AI (autonomous digital employees), horizontal and vertical AI software, and industrial automation. The application stage of AI innovation is expected to generate trillions in value, much of it within private markets.
3. Growth Beyond Technology
Growth equity also captures long-term themes underrepresented in public markets, such as healthc are and defense:
• Health care: AI accelerates drug development and improves operational efficiency, potentially halving timelines for new drugs.
• Defense: Autonomous systems, next-gen cybersecurity, and secure communications are becoming essential, with companies in these sectors scaling rapidly.
• Resilience: Energy and supply chain security are increasingly critical for national competitiveness. Private companies in these sectors often trade at discounts to public peers despite similar growth prospects.
4. Improving Exit Activity and Favorable Macro Conditions
Exit activity is rebounding, with global M&A and IPO volumes recovering, especially in AI. M&A, buyouts and maturing secondary markets provide liquidity beyond public exits. AI-related private transactions surged to $140 billion in the first half of this year. Historically, rate-cutting cycles without recessions have boosted growth equity returns, as lower rates make future earnings more valuable and reduce costs for hiring and innovation.
With resilient secular growth themes, improving liquidity and a supportive macro backdrop, growth equity is well-positioned for strong performance. Investors with limited exposure may miss significant opportunities in this evolving landscape.
Rick Barragan is the Managing Director,
Los Angeles Market Manager, for
J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles
Source: “4 Reasons for a resurgence in growth equity,” Sitara Sundar, Head of Alternative Investment Strategy, Sept. 16, 2025
