In an era marked by unprecedented capital reserves and market dislocation, private-market firms are grappling with a pressing challenge: how to effectively harness the deluge of data flooding their industry.

"The U.S. private market is experiencing its most significant dislocation in 25 years," noted industry leaders at S&P Global's recent Interact conference in New York, where executives gathered to discuss the evolution of private markets in an increasingly data-driven landscape.

The gathering comes at a critical juncture for the industry. Despite abundant capital among major firms, the sector faces headwinds in deploying these resources effectively. Investment firms are becoming increasingly selective, with one prominent firm revealing it invests in fewer than 3% of businesses it evaluates annually.

To navigate this environment, firms are turning to specialized investment strategies. "Thematic investing, particularly in familiar sectors like software and healthcare, allows firms to build deep domain expertise and spot opportunities more effectively," said one panellist during the discussion moderated by Iyan Adewuya, S&P Global Market Intelligence's Head of Product for Enterprise Solutions and Private Markets.

The industry's data challenges, however, run deep. While external vendors are stepping up to provide crucial market intelligence, the lack of standardization remains a significant hurdle. "Foundational data remains siloed and inconsistent," observed one participant, noting that platforms like S&P Global are working to address these technological challenges.

Cloud technology has emerged as a bright spot, offering firms newfound agility in data management. "The ability to access and analyze data at the click of a button has transformed how we operate," said one executive, pointing to reduced infrastructure costs and improved collaborative capabilities.

In the current environment of scarce deal flow, firms are getting creative. One private equity leader advocated for innovative deal structuring and closer collaboration with corporations on portfolio management. This approach has led to the emergence of information-sharing ecosystems, where portfolio companies can access shared resources ranging from HR guidance to remote work best practices.

The rise of artificial intelligence, particularly generative AI, marks another significant shift. Unlike the hype-driven narrative of 2023, panellists noted that 2024 has seen AI find practical applications, particularly in screening the vast number of potential investments that cross their desks.

As private market firms continue to scale, the successful integration of these technological solutions - from standardized data platforms to AI-driven analysis - may well determine which organizations thrive in this new era of private market investing.

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.