Systemic spillovers in high-growth private market sectors: determinants and portfolio implications

This study investigates the systematic spillover dynamics across high-growth private market sectors and their key drivers, with particular emphasis on portfolio diversification implications. Using a time-varying parameter vector autoregression framework, we document substantial and persistent return spillovers, with AI, HealthTech, FinTech, and Mobility Tech acting as dominant transmitters, and AgTech, BioPharma, ClimateTech, and Cybersecurity serving primarily as receivers. Spillover intensity peaks during post-pandemic capital inflows and green policy expansions, and declines during monetary tightening and geopolitical shocks. Employing robust regression and eXplainable AI approaches, we identify short-term interest rates, trade policy uncertainty, and geopolitical risk as the most influential determinants of connectedness. Portfolio tests show that minimum correlation and connectedness strategies outperform minimum variance portfolios, achieving higher risk-adjusted returns and better tail-risk protection. Our results provide new insights into the structural dynamics of high-growth private markets and offer a practical framework for spillover-aware asset allocation.