Why Future Standard's Gayeski says investors should allocate more to private markets

Core Viewpoint - Investors are encouraged to allocate more to private markets, which are expected to yield higher returns compared to traditional public markets, with a projected 15% return for a typical 60/40 portfolio, double the average from 2005 to 2024 [1] Private Market Insights - The focus is on private equity, private credit, and private real estate, with middle market private equity trading at approximately 11 times EBITDA compared to the Russell 2000's 19 times, indicating better growth potential at a lower cost [2] - Middle market private equity offers growth at a reasonable price, with revenue growth of 1.5 to 2.5 times nominal GDP, purchased at a 60% to 80% discount to the Russell 2000 [3] Market Volatility and Diversification - Middle market private equity is expected to compete with the S&P and NASDAQ over time while exhibiting less volatility and drawdown risk, providing true diversification [4] - The middle market is identified as a significant growth engine in the U.S. economy, comprising approximately 200,000 companies [5] Economic Growth and Investment Opportunities - The asset class is projected to experience gross revenue growth of 1.5 to 2.5 times nominal GDP growth, presenting vast investment opportunities [6] - Investing in sectors like HVAC, paving, and specialty foods can yield attractive growth rates of 10% to 15% at reasonable prices, contrasting with the high stakes of broader market trends tied to AI [7] Nominal GDP and Revenue Impact - Strong nominal GDP growth is anticipated, driven by robust real GDP growth and significant business fixed investment, particularly related to AI [11] - Nominal GDP is crucial for driving revenue across both large-cap listed companies and middle market private equity, emphasizing the importance of maintaining strong nominal GDP growth without high inflation [12][13]