MSCI's Luke Flemmer - "bringing clarity to investment decisions"

What It Covers

Luke Flemmer, MSCI's Head of Private Assets, explains how standardizing and normalizing private markets data — drawing on fixed income and FX market structure evolutions — can unlock transparency, price formation, and liquidity while preserving the several-hundred-basis-point alpha that makes private markets structurally distinct from public markets.

Key Questions Answered

• •Data Harmonization Sequence: Transparency, price formation, and liquidity emerge in that order — but only after raw data is normalized onto consistent timescales and quote conventions. Private markets remain stymied at scale until this foundational layer exists, mirroring the transformation fixed income underwent from voice trading to millisecond electronic liquidity within roughly eight years.
• •Durable Alpha Quantification: MSCI's repeated decomposition of private equity performance confirms several hundred basis points of alpha persists across market regimes, net of fees. Sources include managerial operational improvement, incentive alignment, financial engineering, and the illiquidity premium — meaning patient capital matched to a company's growth timeline commands a structurally justified return premium over public equivalents.
• •Daily Private Equity Pricing Methodology: MSCI's 85/15 public-private equity index prices the private sleeve daily by blending lagged quarterly manager marks from the Burgiss dataset with public market equivalent correlations via nowcasting econometrics. Secondary transaction prices are expected to feed back into this model as a flywheel, accelerating price discovery and compressing bid-to-close timelines on secondary deals.
• •PERT Index as Passive Replication Tool: MSCI's Private Equity Return Tracker replicates private equity exposure through a basket of public equities with sector and growth factor tilts, delivering roughly 200–300 basis points of alpha over broad public markets. Goldman Sachs launched an ETF on this index (ticker: GDP), though direct closed-end fund strategies still outperform PERT by approximately 150–200 basis points.
• •Wealth Channel Prerequisites: Scaling private markets into retirement and advisory portfolios requires three specific capabilities: liquidity stress-scenario modeling that matches client expectations to gated-redemption realities, factor decomposition enabling side-by-side risk comparison with public holdings, and standardized terminology so liquidity definitions are consistent across product types — even as acceptable liquidity horizons differ between retail and institutional investors.