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

• Private market unicorn sectors exhibit strong and time-varying return spillovers. • AI, HealthTech, FinTech, and Mobility Tech act as persistent shock transmitters. • AgTech, BioPharma, ClimateTech, and Cybersecurity function primarily as shock receivers. • Short-term interest rates, trade policy uncertainty, and geopolitical risk drive connectedness dynamics. • Portfolios constructed on minimum correlation and connectedness outperform variance-based allocations. 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.