“I’m taking some chips off the table from equities and sitting in cash because valuations are so high.”
— Financial advisor, Columbus Ohio
A: If you believe that public markets are fully valued, it may make sense to lock in gains and rotate to a market that currently offers more attractive valuations, without introducing the drag that might come from cash.
The spread between public and private equity valuation multiples is approaching decade highs.
Public Large Caps vs. Private Equity Valuation1
3-Quarter Rolling Average
However, private equity has not participated in the valuation and multiple run-ups that the public markets, particularly the “Magnificent 7” largest companies, have experienced the last two years. We believe investors still have an attractive entry point into private equity.
For investors wanting to take some chips off the table in public equities and willing to trade some liquidity for lower valuations, private equity can be a way to stay true to target equity allocations without potentially watering down returns with cash.
