The SaaSpocalypse and the Hidden Risks of Private Asset Investments
Markets in recent months have offered a stark reminder of the challenges in modeling risk within private assets. The AI-driven selloff in software companies—aptly termed the “SaaSpocalypse”—has exposed vulnerabilities in private funds that many investors underestimated. As pension funds, sovereign wealth funds, and endowments have increasingly allocated capital to private assets, the implications of this shift are now coming into sharper focus.
The Rise of Private Asset Allocations
Total private asset allocations have surged from $14 trillion in 2020 to approximately $24 trillion in 2025, according to McKinsey & Company. This significant growth has positioned private assets as a critical component of many investment portfolios. However, the recent turbulence has left investors questioning the extent of the risks they face.
“It could be months before anyone really knows,” says Peter Shepard, head of research and development at MSCI’s analytics business. The delay in performance reporting and the subjectivity of valuation assumptions have compounded the uncertainty.
The Challenges of Private Fund Valuations
Private funds typically report performance quarterly, often with a 60-day lag. This means that information reaching investors in May might reflect asset marks from December, which could be based on even older financial data. The smoothing of performance reporting, a practice dating back to the early 2000s, further complicates the assessment of correlations with other investments.
“Traditionally, you would look at private companies and think they have similar factor exposures and correlations to large tech companies,” explains Brad Dunstan, co-chief investment officer of the New Zealand Superannuation Fund. However, the recent divergence in performance between private and public tech sectors highlights the limitations of such assumptions.