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Problem

When a company lists on the stock market, anyone can buy a share. A teacher, a nurse, a first-time investor with a small savings account. But over the last two decades, the most exciting companies in the US have stopped doing that. Instead of going public, they've stayed private. And the people who get to invest in them early are not ordinary savers. They are high-net-worth individuals (HNWIs), meaning people wealthy enough to invest in private companies. The returns on those investments have been extraordinary. And almost nobody else could get in. That matters because wealth in the US has become more and more concentrated at the top. We set out to show with real data and a credible method how much of that gap private markets were actually driving.

Science

Ararat Gocmen of ³Ô¹ÏºÚÁÏ, Clara Martínez-Toledano of ³Ô¹ÏºÚÁÏ and Vrinda Mittal of ³Ô¹ÏºÚÁÏ set out to answer that question. We drew on PitchBook data covering private company financing, US tax records, household finance surveys and the Forbes 400 rich lists. To measure direct cause and effect rather than just correlation, we used a series of US federal tax reforms. The US government expanded a tax break called the Qualified Small Business Stock (QSBS) exclusion, which lets wealthy investors pay no tax on capital gains from selling investments in young private companies. The tax break grew from covering 50% of gains at its introduction to 100% by 2010, where it has stayed. Because not all companies qualify, we could measure the direct effect of HNWIs' investments on both company decisions and the spread of wealth.

Outcome

The numbers tell a striking story. HNWIs' investments in young private companies grew from $0.4 billion to $15 billion over 18 years. Their share of all early-stage financing tripled. The total value of those investments reached $327 billion by 2022, almost double what the same money would have been worth had it been invested in public stock market indices like the S&P 500 instead. The QSBS reforms made eligible companies 5.6% more likely to stay private, keeping high-growth opportunities out of public markets. Our simulations show that HNWIs' higher returns on investments in young private companies explain 26% of the growth in the top 0.5% wealth share in the US. And it compounds: new investors coming in pushed up returns for those already there, who then invested even more.

Change

This research identifies a specific cause behind rising US wealth inequality, one that existing policy has actively encouraged through tax breaks. It also raises a direct question for anyone considering whether to widen access to private markets: doing so will not automatically reduce inequality. Whether it helps or harms depends on whether new investors get the same deals and the same returns as those already there. Pension funds could play a role in giving broader groups of people indirect access to these investments, but only if the returns are genuinely passed through to households. Our research also calls on government agencies to collect and release better data on private market transactions. Without better data on who invests and what they earn, good policy is impossible.

Research by Ararat Gocmen (³Ô¹ÏºÚÁÏ Business School), Clara Martínez-Toledano (³Ô¹ÏºÚÁÏ Business School) and Vrinda Mittal (³Ô¹ÏºÚÁÏ Business School), May 2026.