Research firm Morningstar launched the Morningstar PitchBook U.S. Modern Market Index (Modern Market 100), an index that tracks the performance of 100 of the largest companies in the U.S. across both public and private markets. The index, meant to reflect the fact that a growing share of the biggest companies today are owned by private equity, tracks 90 publicly listed firms and 10 of the largest firms backed by venture capital. The latter include SpaceX, OpenAI, xAi, Stripe, Anthropic and Databricks, among others.
The Modern Market 100 index, which relies partly on data provided by Morningstar subsidiary PitchBook, follows on the heels of Morningstar’s launch of semiliquid fund rankings earlier this summer and an index tracking 30 of the largest late-stage VC firms globally that debuted in January. XA Investments also launched an index tracking interval funds in April. These new products reflect private markets’ growing role in investors’ portfolios. Over a one-year period, Morningstar found that the Modern Market Index showed returns of 28.2% compared to 16% for its Morningstar U.S. Market Index, which tracks only publicly traded companies. Over a 10-year period, the Modern Market Index posted returns of 16.8% vs. 14.1% for the firm’s U.S. Market Index. The Modern Market Index features outsized exposure to technology firms, nearing 50%. Exposure to technology firms in the U.S. Market Index is closer to 30%.
“As private investments make their way into more investor portfolios, investors need better data and relevant benchmarks to capture the modern opportunity set,” said Ron Bundy, president of Morningstar Indexes, in a statement. “Our new index empowers investors with a unified framework that reflects both public and private market leaders, so investors can evaluate public and private investments on the same level playing field.”
The index allocates 90% of its weighting to the largest public companies based on market cap and 10% to private firms, to reflect the size of the public and private equity markets. It will be calculated on a daily basis, with Morningstar relying on verified transactions in the secondary market to estimate the valuations of the venture-backed firms. The firm will use data from aggregation service CapLight and trading exchange Zanbato for those calculations.
Some large venture-backed firms had to be left out of the index because they don’t trade in a significant way on the secondary market, limiting their liquidity, according to Sanjay Arya, head of innovation, index products, at Morningstar. One example of such a firm is Google’s self-driving car-focused subsidiary Waymo, Arya said.
Morningstar will rebalance Modern Market 100 quarterly and reconstitute the portfolio semi-annually. The company has also devised some ways to account for potential mergers and acquisitions impacting the index, Arya noted. For example, it will not change the company’s position in the index during the blackout period following an M&A when certain investors are prohibited from selling their stakes.
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