Explosive Growth of Private Finance Raises Alarms Over Investor Protections
“It is a new day at the SEC,” proclaimed Securities and Exchange Commission Chairman Paul Atkins in a recent Senate testimony, later adding, “It is a new and brighter day for the SEC.” While the declaration may signal renewed focus, the rapid rise of private markets has raised concerns that the agency may be failing to address one of the most pressing shifts in modern finance.
Atkins has pledged to return the SEC to its core mission: “protecting investors; facilitating capital formation; and maintaining fair, orderly, and efficient markets.” Yet, his proposed $2.1 billion budget remains flat, and staffing has been reduced by 447 employees. Alongside a push for the crypto economy, critics argue the SEC appears unbothered by the swelling power of private capital.
Public markets tell a subdued story. Only a few notable IPOs, including CoreWeave and Circle Internet Group, have launched this year. Mergers and acquisitions are largely exits for private equity giants—Constellation Energy’s acquisition of Calpine and Alphabet’s purchase of Wiz are prime examples. Meanwhile, the number of publicly traded U.S. companies has dropped from 8,000 in 1996 to just 4,000.
In contrast, private markets are booming. Thoma Bravo recently raised $34 billion, while private equity now controls over 11,500 companies—up from 2,000 in 2000. Private credit has surged to $1.7 trillion, with Apollo Global Management projecting a $40 trillion opportunity. The firm is partnering with JPMorgan, Goldman Sachs, and others to create a private-credit trading platform.
Venture capital, too, is experiencing historic highs. The number of VC firms has risen to 3,111, managing $1.2 trillion in assets. Anthropic recently secured $1 billion in funding, Neuralink raised $500 million, and xAI is seeking $5 billion in debt and equity with a $113 billion valuation. SoftBank has reportedly invested $40 billion in OpenAI, valuing it at $300 billion.
Hedge funds now oversee $4.5 trillion—more than triple the $1.4 trillion recorded in 2015. The crypto market, valued at $3.4 trillion, continues to add complexity to the financial ecosystem. In all, private funds have ballooned from 35,000 to roughly 100,000 in just a decade.
John Arnholz, a retired securities attorney, remarked, “There always has been evolution in financial markets and there continues to be, none of which was channeled by regulation or shaped that way. The move to privates seems inevitable, but there are consequences.”
JPMorgan Chase CEO Jamie Dimon expressed frustration at the lack of regulatory foresight: “Pretty much all of that was all done without any forethought on the part of our regulators. Like zero, none, nada.” He added, “Healthy, public markets are probably better than having moved all that into private markets. But we’re going to find out.”
Bank of America CEO Brian Moynihan concurred, calling private credit “a competitor” that’s challenging the traditional banking sector: “There are deals that would be hard to do through the bank balance sheet in a regulated environment with capital requirements and the stress testing we have.”
While public market capitalization has grown—from $25.4 trillion in 2015 to $61.5 trillion—much of this is concentrated in a few stocks. Apollo CEO Marc Rowan believes private markets now offer the “alpha” that public markets lack: “We grew up as investors thinking that private was risky and public was safe, but what if that’s not true anymore?”
Rowan’s firm remains aggressive. “We have kept our foot on the gas,” Apollo told investors, committing over $2 billion in M&A activity. Rowan recently became chairman of Apollo, following Jay Clayton, the former SEC chair who returned to public service as interim U.S. Attorney for the Southern District of New York.
Clayton’s tenure at the SEC saw a drop in insider trading cases but a rise in overall enforcement, including actions against Elon Musk and Ripple. However, his time in office lacked significant strategic initiatives addressing the shift to private markets. The same, critics say, applies to his successor, Gary Gensler.
Though Clayton is now back in public service, questions linger about his views on public versus private markets. A request for an interview was declined.
Despite concerns, public markets still offer transparency. Marex CEO Ian Lowitt noted, “As a public company you’re scrutinized very intensely, and a lot of constituencies take a great deal of comfort in that.” His firm went public in 2024 and has since outperformed the S&P 500.
Still, the growing prevalence of private investments for retail investors brings new risks. As Arnholz cautioned, “It would be a regulatory dropped ball if the SEC doesn’t keep a careful eye on what’s happening here.”
