📝 The AGM Q&A with MSCI's Luke Flemmer - building transparency in private markets
Conversations with private markets leaders
MSCI is a mainstay in market infrastructure.
With over $18T in assets benchmarked to its MSCI equity indices, the firm is a leading global provider of investment decision support tools across stock indices, risk analytics and ESG research.
That same knowledge, expertise, analytics, and infrastructure is now being applied to private markets.
MSCI has built out a Private Assets business, developing data, indexes and analytics — including one of the world’s largest collections of private capital data6 — to provide market participants with more clarity across the full spectrum of private asset classes.
In this edition of the AGM Q&A, we had the chance to sit down with MSCI’s Head of Private Assets Luke Flemmer.
Luke brings a wealth of knowledge and a deep understanding of trading and technology to MSCI.
In his role, he is responsible for building, scaling, and overseeing our private assets business, leading commercial strategy, and product development. He is also a member of MSCI’s Management Committee.
Previously, Luke served as Managing Director, Head of Digital Strategy for Alternative Investments at Goldman Sachs Asset Management, and was Co-Founder and CEO of Lab49, a global solutions provider of investment and risk technology to asset managers and investment banks.
When the ION Group acquired Lab49, Luke became co-head of ION’s Capital Markets division, delivering software and solutions to the group’s global financial services customer base. Earlier in his career, Flemmer worked in the fields of robotics and artificial intelligence. He is a CFA® charterholder.
Please enjoy this Q&A with Luke, who has a wealth of knowledge and perspectives on market infrastructure and private markets at a firm that has heritage of building market infrastructure in the financial services’ largest tradable markets is now at the epicenter of the private markets market structure evolution.
Building Transparency in Private Markets: A Conversation with Luke Flemmer
Q: What’s the key lesson from your experiences with market structure transformations in fixed income and FX that applies to private markets today?
If you want automation and scale, you have to standardize and normalize the inputs. I learned that in robotics early in my career, and it’s been true in every market since.
In fixed income, we moved from relationship-driven trading floors to centralized electronic order books in less than a decade. That shift was enabled by standardized data, transparent pricing, and liquidity that followed from both. Data wants to be free – but when it’s disjointed, inconsistent, or not comparable, you can’t achieve real efficiency.
Once you harmonize the data layer, you enable price formation. That enables liquidity, and liquidity reinforces efficiency. It becomes a virtuous cycle.
Private markets face the same challenge, and yet one big difference is ultimately structural: public markets were built around centralized venues with standardization embedded from the start. Private markets evolved bottom-up through bilateral transactions. Now we need to build the shared language and infrastructure that make those transactions comparable and scalable. Until that foundation is in place, scale will remain constrained.
Q: Information asymmetry has benefited some private market participants. How transparent should private markets become, and what does that mean, in particular, for the wealth channel opportunity?
There’s no fixed “correct” level of transparency – it’s an equilibrium that evolves with the market. Information asymmetry can generate value, and I’m not suggesting it disappears overnight. But if the objective is to broaden participation and attract new pools of capital, you inevitably exchange some asymmetry for scalability and trust.
That tension becomes acute in the wealth channel and other investors newer to the asset class. Often, allocation size is a key variable. At 2–3%, private markets can function as a modest diversifier. The exposure is additive, and limited transparency may be tolerable because it won’t materially impair total portfolio outcomes.
At 10–15%, particularly in fiduciary structures like retirement accounts, the standard changes. Advisors need to articulate liquidity characteristics, stress behavior in semi-liquid vehicles, and the sector, geographic, and factor exposures embedded in the allocation. If those exposures can’t be decomposed and compared alongside public holdings, suitability becomes difficult to defend.
That requires a shift from bespoke, bilateral frameworks to standardized infrastructure, particularly around liquidity, fees, leverage, and strategy definitions. A retail investor and a sovereign wealth fund don’t need identical liquidity expectations, but they do need shared vocabulary to describe them precisely.
If private markets are to scale responsibly in wealth and retirement channels, transparency and definitional clarity are not optional. They’re prerequisites.
Q: Will increased transparency compress returns in private markets?
Greater transparency will reduce returns that rely solely on informational advantage. That should not be conflated with eliminating the structural drivers of private market alpha.
If I sell you a glass and you have no idea what it’s worth or that glasses went on sale yesterday, you’ll probably overpay. That’s not real alpha; that’s just information asymmetry. The glass may indeed be more valuable than a plastic cup, justifying a premium. As the market becomes more efficient, it squeezes out that information asymmetry spread while preserving genuine value-creation premiums.
And the alpha in private markets is durable. We’ve taken private equity apart and put it back together many, many times. We analyze public market equivalents, model private versus public performance and test correlations across cycles. Our analysis has found evidence of persistent excess returns over certain public market equivalents, although results vary by strategy and period. What are the dimensions of that? There’s genuine managerial alpha. These firms are making operating companies more efficient, aligning incentives, putting effective structures in place. They’re strong financial engineers doing sensible things with cost of capital and use of debt. There’s also the illiquidity premium: patient capital aligned with a company’s long-term evolution has real value.
Greater transparency may compress asymmetry, but it doesn’t eliminate those underlying return drivers.
Q: How should allocators think about integrating public and private markets in their total portfolio?
We describe the relationship as a T-shape. The vertical bar represents the continued maturation of private markets on a standalone basis – improving timeliness, transparency, and data quality. The horizontal bar represents integration across the total portfolio.
The sequencing matters. If private data isn’t sufficiently consistent – if marks aren’t comparable, fee treatments vary widely, leverage isn’t clearly reflected – then total portfolio analytics can produce false precision. That’s the most dangerous outcome, because if you believe assets are comparable when they’re not, you can get into real trouble.
At the end of the day, allocators are committing capital with the intent to generate return, whether in public or private markets. Once you acknowledge that, it becomes difficult to justify treating those exposures as completely disjoint. The question then becomes: how much should these exposures look the same, and where do they need to remain different?
Full convergence isn’t the objective. Late-stage venture may resemble public equity in certain respects, but early-stage venture, distressed credit, or growth equity are fundamentally different products. If you force private markets to meet every liquidity and transparency standard of public markets, you risk stripping out the very characteristics that generate their premium. So the goal isn’t sameness, but disciplined integration.
Q: You recently launched a daily priced index, the MSCI All Country Public + Private Equity Index. Why does that matter, and what did it teach you about daily pricing of private equity?
That was an interesting product for us – built with 85% public equity and 15% private equity. The construction of that index forced a practical question: if you want a daily composite, how do you daily-price the private sleeve?
That’s where nowcasting comes in and a fundamental part is public market correlation, and building a model that’s a representative cohort of public markets. So you have the combination of a very large data set of marks, both historical and new marks as they emerge, and the imputed relationship to publics.
The dimension which is interesting is how secondary prices can start to feed into that. The evolution of the secondary market is going to be extremely symbiotic with these data tools that we’re building. Because better information on where the imputed price is accelerates price formation, accelerates the bid process, and it accelerates the time to close on secondary transactions. And then the information that’s coming out of those transactions can positively feed back into the development of those indexes.
The daily index for public and private matters because many institutional investors have 20–30% private exposure. They’re taking global equity risk across public and private markets, and they need a unified lens to view it through. It also helps address denominator effects. When public markets gap down but private marks adjust more slowly, portfolios can become unintentionally overallocated. Daily reference pricing reduces that distortion and can support more coherent capital allocation decisions.
Q: Can secondary markets and derivatives scale from here, even though secondaries are still single-digit percentages of total private market size?
Yes, and the analogy is fixed income mutual funds. Only a small percentage of underlying bonds trade on any given day, yet investors trust the NAV because there’s enough marginal liquidity that people feel confident that’s where value is.
Private markets don’t require every asset to trade frequently for price discovery to function. A sufficient level of independent reference pricing, supported by secondaries and robust methodologies, can anchor value. That foundation enables counterparties to underwrite derivatives, swaps, or structured notes linked to private market exposures. That’s where indexation has a real role to play. When value is independently derived and methodologically transparent, it’s far easier to take the other side of a trade.
Secondaries are a big, fast-growing business and as secondary prices flow back into pricing models, that’s going to be very significant for the overall market structure evolution.
Q. How is AI changing private markets infrastructure, and how is MSCI leveraging it – both internally and for clients?
AI is not a substitute for data infrastructure – it’s an amplifier of it. The quality of the output will always be constrained by the quality, structure, and normalization of the input. That’s especially true in private markets, where information is heterogeneous, episodic, and often embedded in unstructured formats. AI helps extract structure from that complexity – parsing manager reports, harmonizing definitions, identifying inconsistencies, and improving timeliness at scale.
For clients, AI enhances analytics: improving nowcasting, refining risk modeling, and strengthening scenario analysis across public and private exposures. AI also supports broader transparency. For instance, as operating company information expands, AI-driven entity modeling enables more granular risk assessment, even when disclosure is partial.
But AI won’t eliminate the structural distinctions of private markets. It won’t make early-stage venture liquid or remove the illiquidity premium. What it can do is reduce friction, compress non-value-creating asymmetry, and improve investor decision support.
In that sense, we believe AI can accelerate the institutionalization of private markets. The firms that combine independent data, disciplined modeling, and technological leverage will build trust in the next phase of market evolution. That’s where we’re focused.
Q: Can a passive basket replicate private equity performance? What does that tell us about alpha?
We launched the Private Equity Return Tracker (PERT) Index to explore this very question. We took our rich historical dataset on private equity and asked: What would it look like to replicate that with a basket of public equities? We then constructed a representative basket of public equities designed to replicate private equity performance and are offering it to clients as a new index.
However, private equity performance is often attributed to general partner managerial skill – operational improvement, disciplined capital structures, and aligned incentives. That’s genuine and durable. You can capture part of the private equity premium systematically, but not all of it.
Q: What building blocks are in place today for private market infrastructure and what still needs to happen for private markets to scale sustainably?
First, it’s important to acknowledge that the foundation is much stronger than it was a decade ago. Manager reporting remains the source of truth, and those marks have now been tested through multiple regimes, including COVID. LPs have become more demanding – they want to understand what’s in the fund and its characteristics. The pressure from LPs has translated into improved disclosure at the operating-company and loan level; it’s also driving better discipline and greater transparency, particularly in evergreen structures. The baseline quality of data is meaningfully higher than it used to be, and that’s a good thing for all market participants.
Technology will only accelerate this progress further – but technology only works if the underlying data is consistent. That’s where the next phase begins. Scaling private markets – especially among the wealth channel and within retirement portfolios – requires institutional-grade infrastructure. Public portfolios are constructed with disciplined risk decomposition, factor analysis, and explicit liquidity assumptions. Private exposures need to operate within that same analytical framework if they’re going to sit meaningfully alongside stocks and bonds.
That means broader adoption of the standards we’ve discussed – consistent marks, clear fee treatment, precise liquidity definitions, and richer underlying data – alongside tools that place private and public exposures side-by-side for allocation, risk, and stress testing. Liquidity – and the gap between expectation and reality – remains a leading consideration.
Remember, integration doesn’t mean forcing private markets to behave like public markets. It means building enough transparency and comparability to manage risk coherently, while preserving the structural features that generate their premium. Markets scale when trust scales. And trust ultimately rests on independent data, standardized language, and transparent methodologies. If we get that infrastructure right, private markets can expand access without compromising discipline, and we believe that will define the next chapter of global capital formation.
Alt Goes Mainstream’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. Alt Goes Mainstream’s work may feature entities in which Broadhaven Ventures or the author has invested in.