Want Historically Premium Returns? See PE.

Want Historically Premium Returns? See PE.

All Private Equity 10-Year Rolling TWRs

All Private Equity 10-Year Rolling TWRs

For this week’s chart, we explore 10-year annualized returns on a rolling basis. Over a long time horizon, private equity has bested listed equities over most 10-year periods and across various market cycles. In fact, when compared to the MSCI World index, private equity outperforms in every time frame. Even when taking into account the most recent period of public market volatility, private equity continues to substantially outperform.

Private equity outperformance is typically most pronounced during periods of mediocre or negative public market returns. This disparity arises more from the volatility in public markets than from the nature of private markets themselves. When public markets are strong, private equity's outperformance diminishes; in any other environment, it increases. Regardless of market volatility and market cycles, private equity continues to generate premium returns that investors cannot access from listed equities.

Catch up on Chart of the Week.


Definitions

Private Equity – A broad term used to describe any fund that offers equity capital to private companies.

Time-weighted Return – Time-weighted return is a measure of compound rate of growth in a portfolio.

S&P 500 Index – The S&P 500 Index tracks 500 largest companies based on market capitalization of companies listed on NYSE or NASDAQ.

MSCI USA Small Cap Value Index – The MSCI USA Small Cap Index is designed to measure the performance of the small cap segment of the U.S. equity market.

MSCI World Index – The MSCI World Index tracks large and mid-cap equity performance in developed market countries.

Volatility – Volatility is a statistical measure of dispersion of return, specifically standard deviation. 

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