Introduction

Private equity’s role in the United States economy is currently facing an accountability crisis. After a decade of significant growth, assets under management nearly quintupled between 2013 and 2025, rising from approximately $1.6 trillion to $7.9 trillion. Private equity (PE) sponsors now control companies with an enterprise value equivalent to roughly 29 per cent of the S&P 500 and employ between 6.5 and 13.3 million workers. Despite this significant economic footprint, traditional mechanisms of market accountability have dissipated. In 2025, only 26 out of 1,619 private equity exits occurred via an initial public offering (IPO), and corporate acquisitions represented less than a third of total exits. Instead, “secondary” sales to other members of the PE sponsor community and sales to affiliated continuation funds have featured prominently, raising concerns about “back-scratching” incentives and inflated valuations.

I. The private equity accountability crisis

The economic importance of private equity has grown rapidly in the post-Global Financial Crisis period, yet the verifiability of exit realisations has deteriorated. The average holding period for buyout assets reached 6.7 years in 2024, a full year longer than the 20-year average of 5.7 years. Research indicates that 78 per cent of respondents report holding assets for more than five years, with common reasons cited as the asset not reaching growth targets or the existence of a “valuation gap”. There is a growing backlog of sponsor-owned assets in their divestment period; in 2024, more than 18,000 companies had been under PE ownership for more than four years.

Accountability is further weakened by shifting compensation models. Historically, the “2 and 20” model tied sponsor returns to performance through “carried interest”. However, the model now depends more on management fees based on the size of the portfolio. For instance, in 2024, Blackstone generated $7.2 billion in management fees compared to $3.8 billion in carried income, while Apollo Global Management reported $2.8 billion in management fees. Internal performance metrics such as Internal Rate of Return (IRR) and Multiple of Invested Capital (MOIC) are often inadequate as they lack standardised verifiability and can be manipulated by the strategic use of borrowing or subjective “marks” on unrealised values.

II. Private equity without accountability: the return of the conglomerate

The current private equity boom resembles the conglomerate movement of the 1950s to 1970s, where companies assembled vast portfolios of unrelated businesses under the assumption that central headquarters could provide superior oversight. This historical experiment is widely deemed a failure, as it created negative synergies and contributed to economic stagflation. PE sponsors are now assembling similar diverse portfolios; as of 2025, reporting shows PE investments across 24 different industries, including software publishing, consumer lending, and supermarkets. Without accountability measures, this breadth of acquisition raises the prospect of large-scale resource misallocation, where capital is shifted away from high-productivity sectors.

III. Private equity without accountability: systemic risk

The absence of verifiable exits creates the risk of a self-inflating bubble, where sponsors maintain artificially high portfolio valuations via conflicted sales. This is exacerbated by the trend of “democratising” private equity to retail investors, potentially unlocking $10 trillion in retirement assets that lack the sophistication to scrutinise performance. Furthermore, there is systemic risk related to private credit, which finances most PE acquisitions. Financial uncertainty in PE portfolio companies could trigger runs on private credit funds, leading to credit rationing by banks and potentially catastrophic consequences for the broader economy, similar to the 2008 financial crisis.

IV. Proposal: mandatory disclosure of significant PE companies

The authors propose that the Securities and Exchange Commission (SEC) mandate the disclosure of operating and financial results for “significant” PE portfolio companies. Significance would be measured as generating $600 million in annual revenues or a reported value of $1 billion, effectively aligning with mid-cap public company thresholds. The disclosure would consist of annual audited financial statements under GAAP and 8-K filings for material events. Such a regime would not be overly burdensome, as sponsors already produce these financials for creditors and internal reporting.

The SEC has existing authority under Section 404 of the Dodd-Frank Act to require such reporting for the protection of investors and the assessment of systemic risk. Alternatively, disclosure could be made a condition for a fund’s inclusion in retirement plans by ERISA trustees. The report highlights that major US private equity firms already operate under similar disclosure regimes in the United Kingdom, as established by the Walker Commission, without damaging their competitive prospects.

V. conclusion

Private equity has transformed the American economy, but without market-based accountability, its ongoing benefits are uncertain. Mandating transparency for significant portfolio companies is a relatively simple and inexpensive method to illuminate the sources of value creation. Such disclosure is essential to prevent resource misallocation, protect retirement savers, and ensure that the growth of the industry benefits the wider US economy.