JPMorgan Chase & Co. created an index tracking private midsize companies in the U.S. with a combined $1 trillion in annual revenue, the first of a series of planned tools to provide investors with greater transparency into the world of closely held firms.
The product is aimed at providing general partners, limited partners, corporations and middle-market firms "an institutional-grade measuring stick," according to a pair of JPMorgan research reports this week announcing the new benchmark. It includes about 6,400 firms, each with annual revenue of $10 million to $1 billion.
The index's levels will be estimated based on revenue growth and other financial metrics from the private companies, and using valuation multiples from publicly traded peers. The firm said the index should be a useful tool for tracking the underlying performance of companies, even as it must "acknowledge the structural realities of the asset class."
"The scale and growing significance of the middle market stands in direct contrast to the state of its measurement infrastructure," analysts led by Gloria Kim, JPMorgan's head of global index research, wrote in one of the reports.
The number of publicly traded companies has dropped by nearly half since the late 1990s, while the number of private firms has soared — a dynamic Jamie Dimon, JPMorgan's longtime boss, has spoken about repeatedly in recent years. That's prompted financial firms including JPMorgan to make a variety of inroads into the growing world of private firms.
JPMorgan's benchmark, called J.P. Morgan Private Assets Index (JPAX)-Middle Market, will serve as a "diagnostic instrument" rather than a tradable index. Last year, the firm added research coverage of individual private companies, starting with OpenAI.
The firm said it would produce a historical index level going back to the end of 2019, in order to capture changes over the years and the effect of the pandemic.
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