Ross Gerber Warns Private Market Assets Are Overvalued And Risky For Investors

Ross Gerber, the outspoken CEO of Gerber Kawasaki Wealth and Investment Management, is sounding an alarm that few on Wall Street want to hear. In a series of public comments reported by Benzinga, Gerber accuses large private-market players of systematically overvaluing troubled private credit and private equity assets, creating what he describes as a dangerous illusion of stability that mirrors the dynamics preceding the 2008 financial crisis. The critique is blunt, and if even partially accurate, it has implications for millions of investors who have poured capital into private market vehicles over the past several years.

Gerber's central claim is that private market firms are not marking down the value of assets that have clearly deteriorated in public market equivalents. When a publicly traded loan or equity position loses value, the decline is visible in real time through market prices. Private market assets, by contrast, are valued infrequently, often using models and assumptions set by the firms that manage them. Gerber argues that this creates a structural incentive to maintain inflated valuations, because markdowns trigger client redemptions, reduce management fees, and erode the perceived performance track record that funds rely on to raise future capital.

The comparison to the 2008 crisis is provocative but not without substance. In the years leading up to the mortgage crisis, banks and financial institutions held mortgage-backed securities at values that bore little relationship to their actual market worth. Mark-to-model accounting, combined with illiquid markets and conflicts of interest, allowed firms to maintain the fiction of stable values even as the underlying assets deteriorated. When reality finally intervened, the corrections were abrupt and catastrophic. Gerber sees a similar dynamic playing out in private credit and private equity, where assets that would be worth substantially less if traded on public markets are being carried at historical cost or model-derived values that flatter the manager's performance.

The private credit market has grown enormously in the years since the 2008 crisis, expanding from roughly $500 billion to well over $1.5 trillion. Much of this growth has been driven by non-bank lending, as regulatory changes after the crisis made traditional bank lending less attractive for certain types of corporate borrowers. Business development companies, or BDCs, have been among the most popular vehicles for retail and institutional investors seeking higher yields in a low-rate environment. But the industry is now showing signs of stress. Non-traded BDCs have experienced rising redemption requests, and several prominent funds have been forced to gate withdrawals or sell assets at discounts to meet liquidity demands.

The Wall Street Journal reported in April that investors are increasingly worried about overvaluation in private equity holdings and questioning whether regulators and auditors will hold firms accountable. The concern is that the self-reporting nature of private market valuations, combined with limited regulatory scrutiny, creates an environment in which honest markdowns are punished by the market while inflated values are rewarded with continued fee income. This is not merely an academic concern. The McKinsey Global Private Markets Report for 2026 documented slowing distributions from private equity funds, meaning that investors are waiting longer to receive returns on their commitments even as fund managers continue to report positive performance.

The structural opacity of private markets makes the problem difficult to quantify. Unlike public companies, which must disclose financial results quarterly and are subject to independent audits with well-defined standards, private market firms report valuations on their own schedule using their own methodologies. Limited partners and retail investors often have limited visibility into the underlying assets and must rely on the general partner's word that the values are accurate. When the general partner's financial incentives align with maintaining high valuations, the system is vulnerable to the kind of slow-burn mispricing that Gerber describes.

There is a legitimate counterargument that private market valuations are inherently less volatile than public market prices because the underlying assets are long-duration investments that should not be marked to short-term market fluctuations. A private credit loan with a five-year maturity does not need to reflect the same price volatility as a publicly traded bond with equivalent credit risk, the argument goes, because the private loan is intended to be held to maturity and the borrower's ability to repay is what matters, not the price at which the loan could be sold today. This argument has merit for high-quality credits, but it breaks down when the borrower's creditworthiness has genuinely deteriorated and the fund is carrying the asset at par anyway.

The practical question for investors is whether the private market assets in their portfolios are worth what the statements say they are worth. For investors in non-traded BDCs or private equity funds that have shown stable or rising valuations even as public market equivalents have declined, the answer may be uncomfortable. The gap between public and private market valuations for similar assets has widened noticeably in recent months, a divergence that historically resolves through private market markdowns when the pressure to reconcile becomes unavoidable.

What This Means For You: If you hold private credit or private equity investments, review your statements with healthy skepticism. Compare the reported values of your holdings to the prices of publicly traded equivalents with similar credit quality and duration. If there is a significant gap, it may indicate that your assets are overvalued on paper. For investors considering new commitments to private market funds, demand transparency on valuation methodology and independent audit practices before committing capital. For financial advisors, this is a moment to have honest conversations with clients about the risks of illiquid, opaquely valued assets, particularly for retirees or others who may need liquidity on short notice. The lesson of 2008 is that assets are worth what someone will pay for them, not what a model says they are worth. Private markets have provided strong returns for many investors, but the current environment demands more diligence, not less.