Bain & Company’s recently released Global Private Equity Report finds that over the last 10 years private equity performance has been roughly equivalent to the performance of the S&P 500 PME.* Whereas over a 30-year period US buyout funds have outperformed this index generating average net returns of 13.1% compared against 8.1%, in the last 10 years US buyout funds have delivered 15.3% versus 15.5%.
Between these two approaches the discrepancy in effort required to achieve these results is massive. As a private equity practitioner you are required to raise funds, identify attractive investment opportunities, transact and manage each portfolio holding through an exit. Or, over the last 10 years, you could have purchased an index and outperformed while enjoying greater liquidity.
You would not know it by the record fund-raising years private equity has enjoyed recently. Click on the link below for an excellent read.
*From Wikipedia: “The public market equivalent (PME) … attempts to measure the return from deploying a private equity fund’s cash flows into a stock market index.”