Private markets: Three conditions for benefits without risks
François Villeroy de Galhau, Governor of the Banque de France, addressed the rise of private markets at the Bloomberg Forum on March 12, 2026. He outlined three conditions to harness their potential benefits for the European economy while mitigating inherent risks.
The dual nature of private market growth
The rise of private markets has been significant, with global assets under management more than tripling to USD 16.2 trillion by June 2025.
This growth was fueled by investors seeking higher returns in a low-interest-rate environment, alongside a decreasing interest in IPOs and banks shifting to safer assets.
However, this expansion introduces two primary vulnerabilities: liquidity and valuation risks.
Liquidity concerns are evident from recent significant redemption requests faced by major players like Blue Owl Capital, Blackstone, and BlackRock, with some activating gates.
Valuation risks manifest through failed large-cap private equity deals and markdowns by banks on private credit investments, often concealed by opaque arrangements like payment-in-kind (PIK) or looser covenants.
The increasing interconnectedness with other financial institutions further amplifies these risks, as demonstrated by recent collapses and accusations of double-pledging collateral.
Europe's innovation funding gap
Despite the inherent risks, private markets, particularly private equity, offer a crucial opportunity to stimulate economic activity and innovation within Europe.
They provide stable, long-term financing essential for high-growth companies, especially through venture capital.
However, Europe significantly lags behind the United States in this domain, accounting for only 20 percent of global private equity capital raised in 2025.
Between 2019 and 2023, EU venture capital investments totaled just EUR 65 billion, starkly contrasting with the US's EUR 739 billion.
This disparity is exacerbated by a fragmented European market where VC funds face challenges in exiting investments.
To address this, Villeroy de Galhau proposed five levers under a 'Savings and Investments Union,' including enhanced European supervision for investment funds and the development of pan-European retirement savings.
Balancing promise with peril
The rise of private markets presents a clear dilemma for European finance, offering vital innovation capital but also significant systemic risks.
Villeroy de Galhau's proposed conditions for transparency, harmonisation, and resilient liquidity are essential, yet their implementation will require sustained political will across a fragmented continent.
Without decisive action, Europe risks either stifling growth or exposing its financial system to avoidable vulnerabilities.