Mega-IPOs, passive ETF flows and the rise of private capital are shifting where value is created says Canadian asset management leader
The next generation of mega-IPOs could fundamentally reshape how investors think about growth, portfolio construction and the role of public markets.
That’s according to Jay Bala, CEO of AIP Asset Management, who told WP that a potential SpaceX listing — widely speculated to approach a US$1 trillion valuation — would signal a deeper structural evolution already underway across capital markets.
Unlike earlier technology giants that entered public markets during formative growth stages, Bala said today’s private capital ecosystem allows companies to mature long before listing.
“The core difference that SpaceX’s IPO could represent is where the value creation has already taken place,” he said. “If you look back, Apple and Microsoft went public when they were still in their relatively early stages of growth and development. Google went public at a much larger market cap. Meta was even larger. Over the past 20 years, private capital has expanded dramatically, which has allowed companies to scale privately in ways that simply were not possible before.”
The asset manager’s leader added that such a listing would represent less a fundraising exercise and more a liquidity transition.
“A company like SpaceX would potentially list as a fully built, globally dominant platform. It would not be raising growth capital in the traditional sense. It would be transitioning from private ownership to public liquidity. For advisors, that is the real shift. The most meaningful phase of growth may already have happened before the IPO even occurs.”
Passive flows and “index-ready” IPOs
If companies increasingly arrive on public exchanges already operating at global scale, Bala believes the mechanics of market entry could also change rapidly, particularly through accelerated index inclusion.
“If a company of that size enters major indices shortly after listing, you create immediate structural demand,” he said. “Passive vehicles and ETFs buy because they have to. They are not evaluating valuation in real time. They are tracking benchmarks. That can compress flows into a short window.”
For long-term investors and their advisors, Bala believes that the implications extend beyond short-term trading dynamics.
“For something at that scale, the capital movement could be significant. For advisors, this reinforces how powerful passive flows have become in shaping short-term price action. It also highlights that by the time a company is index-ready, much of the early upside has likely occurred in private markets.”
Still, he emphasized that public markets remain central to portfolio construction.
“It does not make public markets less important. It simply changes how returns are distributed across the lifecycle.”
Public markets as liquidity venues
The delayed IPO trend is already reshaping the traditional purpose of stock exchanges, notes Bala, particularly as leading AI companies remain private despite commanding enormous valuations.
“Public markets used to be where companies raised growth capital. Increasingly, they are where companies provide liquidity,” he said. “Look at the AI ecosystem. OpenAI, Anthropic, xAI. These are some of the most important companies in the world today, and they remain private.”
As a result, advisors may need to recalibrate expectations about where the strongest returns occur.
“So, in many cases, yes, the steepest part of the growth curve is happening before a public listing,” Bala said. “That does not eliminate opportunity in public equities. It does mean the growth profile is different than it was a generation ago. Advisors need to recognize that capital formation has shifted upstream.”
Rethinking portfolio construction
If innovation increasingly happens behind closed doors, Bala argues that portfolio frameworks built around traditional public markets may require evolution.
“The 60/40 framework was built in a period when public equities captured most of the growth and fixed income provided stability,” he said. “Today, the pre-IPO universe is measured in the trillions. There are more than 1,200 unicorns globally.”
Many of those companies are remaining private longer while achieving greater scale, he noted.
“That suggests portfolios may need to evolve. In our view, a well-constructed portfolio increasingly includes three pillars: public equities, fixed income, and alternatives that provide exposure to private growth.”
He framed the shift as pragmatic rather than radical.
“This is not about abandoning discipline. It is about aligning portfolios with where innovation and capital formation are actually happening.”
Expanding access to private markets
Access to private companies is also changing, Bala said, as institutional structures increasingly allow diversified exposure ahead of IPOs.
“Access is becoming more institutional and more diversified,” he explained. “The conversation has moved beyond unicorns. We are now talking about decacorns and even companies valued above 100 billion.”
He noted that valuation momentum often accelerates shortly before a listing.
“Many of these businesses begin to see meaningful valuation repricing 12 to 24 months ahead of a potential IPO,” Bala said. “Rather than trying to pick a single winner in AI, which is extremely difficult, we are seeing more diversified approaches that target a basket of leading private companies.”
Diversification remains central: “That structure matters. It allows clients to participate in private growth without taking single name concentration risk.”
IPO risk
Despite growing interest, Bala cautioned that private investments carry distinct risks that require careful management.
“Liquidity is the first consideration. These investments are not traded daily. Allocations need to reflect a client’s time horizon and overall portfolio structure,” he said.
Transparency and underwriting discipline are equally important.
“Valuation transparency is another factor. Private markets do not have continuous price discovery. Underwriting discipline and manager selection are critical.”
He added that diversification can help mitigate uncertainty in rapidly evolving sectors such as artificial intelligence.
“Concentration risk may be the biggest practical issue. In fast moving sectors like AI, it is very difficult to predict the ultimate winner. A diversified approach across multiple leading companies can help manage that risk. Pre-IPO exposure should be a strategic allocation within a broader portfolio, not a speculative trade.”
The rise of ‘index-scale’ IPOs
Looking ahead, Bala expects the emergence of mega-listings to accelerate as private capital continues expanding.
“Yes, I believe we will see more of them,” he said. “As private capital continues to scale, companies will come public at increasingly larger valuations. When that happens, index inclusion and passive flows become central to the process.”
That shift could alter price discovery and reshape the competitive landscape for asset managers.
“It has implications for active managers because price discovery may be influenced more heavily by structural flows. It reinforces the growing role of ETFs in capital allocation. And it changes how we think about IPO pricing, which historically was about raising growth capital,” he said, concluding that “the investment lifecycle has evolved. The IPO is no longer the beginning of the growth story. In many cases, it is the transition point. Portfolio construction needs to reflect that reality.”
