The Plumbing of Private Markets: A Bottleneck on Growth

The global economy has come to rely heavily on private markets, which drive investment and innovation across industries. However, as a recent report from BNY highlights, the infrastructure supporting these markets has not kept pace with their rapid expansion. The systems that once facilitated growth are now hindering it, creating a bottleneck on scale.

Private market growth is staggering: semi-liquid and evergreen vehicles have more than doubled in assets under management since 2022, reaching $500 billion by September 2025. Private credit is an even larger player, with an addressable market approaching $40 trillion once investment-grade assets and other income-generating strategies are included. Yet, despite this growth, the back office remains fragmented and inefficient.

The problem lies in the plumbing that connects these markets. Asset servicing, cash movement, collateral pledging, and ownership records are scattered across a patchwork of intermediaries, legal agreements, and disconnected platforms. This fragmentation creates friction, slowing down trade settlement for private credit to up to 30 business days.

BNY’s report frames this as more than just a growing pain; it’s a structural shift in how capital markets work. Private and public holdings are increasingly treated as one unified book of business, rather than two separate worlds. This blurring of the line raises the bar for infrastructure connecting them, which needs far more scale, standardization, and interoperability.

BNY proposes a foundational redesign built around four pillars: persistent identifiers, structured terms, certainty of asset servicing and settlement, and collateral utility. These pillars aim to modernize the life cycle of investment assets, improving access to institutional investors and individuals alike.

Tokenization paired with smart contracts is a key aspect of this redesign. This technology enables delivery-versus-payment settlement, where ownership transfer and cash movement happen simultaneously and atomically, eliminating lags and cash breaks. Compliance checks can be embedded directly into tokens themselves, streamlining the process.

However, tokenization alone is not enough; it needs a network to matter. Interoperability – the ability to shift tokenized assets, cash, and data across different platforms – is crucial for widespread adoption. The BNY report emphasizes that tokenizing an asset only has value if the token can actually move.

BNY’s solution echoes earlier efforts to modernize infrastructure. In the 1980s, the securities industry introduced CUSIPs (Committee on Uniform Security Identification Procedures) and ISINs (International Securities Identification Number) to standardize asset identification. These identifiers enabled real-time tracking of assets across exchanges and custodians.

BNY’s four pillars build upon this foundation, recognizing that data is no longer just a byproduct but shared infrastructure for the entire market. By digitizing ownership-level data at the asset level, creating a single source of truth, and producing more consistent records across servicing, transfers, and valuation, BNY aims to strengthen auditability.

The question remains: will this proposed redesign be enough to overcome the current bottleneck on growth? Can private markets truly modernize their infrastructure without sacrificing the bespoke nature of these investments? As investors increasingly treat private and public holdings as a unified book of business, the pressure is on to create an efficient and scalable system that can support this new reality.

BNY’s proposal represents a necessary step towards bridging the gap between growth and infrastructure. However, it also raises questions about the long-term implications of tokenization and the role of networks in facilitating asset movement. As we move forward, one thing is clear: the plumbing of private markets needs to change – and fast – if this sector is to reach its full potential.