Private Markets, Public Prices and the Value of Patience

Fort Capital Partners | Q3 2026

Private capital has become an enormous part of the financial world. Private equity, private credit, infrastructure and other alternative investment strategies collectively represent tens of trillions of dollars in assets, financing everything from traditional businesses to the extraordinary buildout of artificial intelligence.

This growth raises an interesting question: As private markets become larger and more mainstream, what actually makes them different from public markets?

Matt Levine, who writes Bloomberg’s excellent Money Stuff newsletter, recently explored this question through two observations that caught our attention. One concerns the returns investors earn in private markets. The other concerns how we measure the value of the assets they own.

We think both deserve consideration.

Are investors paying for alpha but receiving beta?

In investment language, beta describes returns associated with general market performance. Alpha describes the additional returns generated through superior investment decisions or skill.

Historically, private equity investors sought alpha by finding attractive businesses, improving their operations and ultimately selling them at a profit. Investors accepted illiquidity and relatively high fees in exchange for the prospect of superior returns.

Levine observes that something changes when private capital grows to its current scale. With trillions of dollars to invest, the largest managers cannot rely entirely on finding overlooked opportunities. They increasingly finance broad segments of the economy, including the massive investment now flowing into AI infrastructure.

His argument is that private markets are increasingly delivering something resembling beta – exposure to general economic growth – while continuing to charge fees more commonly associated with alpha.

It’s a provocative observation, and one worth considering. But we think it misses something important.

Private ownership can create value beyond simply providing capital.

Private equity investors often have considerable influence over strategy, management, governance and capital allocation. Unlike passive shareholders, they can actively shape the businesses they own. That involvement can improve performance, and investors should be compensated for creating that value.

There is another advantage that may be less obvious: patience.

Public companies operate in an environment where share prices, investor sentiment and the cost and availability of capital can change dramatically, sometimes without much change in the underlying business. Those fluctuations can influence investment decisions. A company trading at a depressed valuation may find raising equity unattractive, even when it has excellent opportunities to invest. Conversely, an elevated share price can encourage decisions that make less sense when viewed through a longer-term lens.

A well-capitalized private business, particularly one supported by patient investors, can be better positioned to make decisions based on expected long-term returns rather than the market’s mood on any particular day.

Of course, private ownership does not eliminate economic risk, nor does it guarantee patient capital. Private equity funds have investment horizons, financing constraints and their own pressures to deliver returns. And many public companies demonstrate exceptional long-term discipline.

But the structure of ownership matters. The ability to make rational capital allocation decisions, relatively insulated from short-term market pressures, has real economic value.

So perhaps the question is not simply whether investors are paying alpha fees for beta returns. It is whether the manager and ownership structure are creating enough additional value to justify the cost.

Is the last price the right price?

Levine’s second observation concerns the valuation of private credit.

Suppose a private lender holds a portfolio of loans. The borrowers are performing as expected, interest payments are current and there have been no significant changes in their businesses. Meanwhile, comparable publicly traded loans decline in value. Should the private lender mark down its portfolio?

Levine argues that it should at least consider doing so. Public credit markets provide information about changing yields, risk and liquidity. Ignoring that information simply because a private loan hasn’t traded can create an illusion of stability. We agree, particularly when it comes to credit.

Loans generally have contractual interest payments, maturities and repayment obligations. These characteristics make them reasonably amenable to valuation using observable market yields and credit spreads, adjusted for differences in credit quality, security and other terms.

Equity is a little different.

In our Q4 2025 letter, we discussed the distinction between the marginal price of a publicly traded security and the value of the underlying business.

We made the observation that the last trade in a public security is often treated as a proxy for fair value, even though it may represent only a small amount of capital responding to short-term circumstances.

As we put it then:

“It is a price of liquidity, not necessarily a measure of underlying worth.”

Consider a company whose shares decline 10% in a difficult trading session, despite no meaningful change in its operations or long-term prospects. Has the value of the entire business really fallen by 10%?

Perhaps. But not necessarily.

The price may reflect a genuine change in expectations, or it may reflect a seller’s need for liquidity, changing sentiment or other short-term pressures. And the price of a minority shareholding is not necessarily what a buyer would pay for control of the entire enterprise.

None of this means public-market prices should be dismissed. They contain valuable information, including changes in the returns investors require. But neither should they be treated as an infallible measure of fundamental value.

This brings us to an interesting distinction.

Public markets may overreact to new information. Private markets may be slow to reflect it.

A frequently quoted price does not necessarily mean an asset’s underlying worth changes every minute. Equally, an asset that is valued only quarterly does not somehow become less risky.

The challenge is understanding what the price is telling us – and what it isn’t.

What matters in the end?

These observations are relevant well beyond investment funds.

As private capital continues to grow, business owners and boards have more choices about how to finance, own and grow their businesses. Public and private capital each offer advantages, and neither is inherently superior.

The important questions remain familiar. What is the true cost of capital? How much flexibility does it provide? Does the ownership structure support sound long-term decisions? And are we distinguishing between changes in market prices and changes in underlying economic value?

These are ultimately capital allocation questions, and they sit at the centre of what we do at Fort Capital.

The best decision is not necessarily the one that produces the highest valuation today, the lowest apparent volatility or even the cheapest financing. It is the one that creates the greatest long-term economic value, considering the alternatives and the risks involved.

A good read

We’ve referred several times to Matt Levine’s Money Stuff, and we’d encourage anyone interested in financial markets to subscribe. Levine has a remarkable ability to explain not only how markets work, but also the incentives, contradictions and occasionally quirky situations that make them so fascinating.

His daily newsletter is informative, often funny and refreshingly skeptical. You don’t need to agree with every conclusion to enjoy the thinking behind it.

The October 15 edition, Private Markets Are the New AI Markets, inspired much of this discussion. Money Stuff is available as a free email newsletter, although access to Bloomberg’s website may require a subscription.