December 20, 2012

Private Equity Performance Continues to Outpace Public Market Returns

Bailey: “Investors saw big swings in public markets over the past five years, with the S&P 500 losing more than half of its value and then doubling again.  Despite these large gains, private equity investments continue to provide higher returns on an annualized basis.”

Despite recent lackluster returns in the public markets, private equity continues to deliver superior returns to its investors – pension funds, charitable foundations and university endowments.  New research released today by the Private Equity Growth Capital Council (PEGCC) shows that private equity returns (net of fees) outpaced the S&P 500 (including dividends) for each return horizon, besting the index’s annualized 10-year return by 7.5 percentage points and 5-year return by 5.8 percentage points.

“Investors saw big swings in public markets over the past five years, with the S&P 500 losing more than half of its value and then doubling again.  Despite these large gains, private equity investments continue to provide higher returns on an annualized basis,” said Bronwyn Bailey, PEGCC Vice President of Research.  The research is part of the quarterly PEGCC Private Equity Performance Update, which compares annualized private equity returns from 1-, 3-, 5- and 10-year benchmarks to public equity indexes.

Large public pension funds also continue to report superior returns from their private equity investments. PEGCC’s analysis of recently published data from 15 pension funds that are among the 50 largest funds by assets shows median private equity returns exceeded the S&P 500 for 1-, 3-, 5-, and 10-year time horizons by 1.3, 0.3, 5.9, and 7.3 percentage points. “By providing pension funds annualized returns of 12.6 percent over the past 10 years, private equity investing is essential to sustaining public plans’ funded status by growing assets at a faster rate than portfolio target returns of seven or eight percent,” Bailey concluded.

“The research released today confirms that private equity is a top performing asset class for large public pension funds, charitable foundations and university endowments.  Private equity delivers superior returns that help to strengthen the financial security of millions of hard-working Americans, increases funds available to charities and bolsters assistance to students nationwide,” said Steve Judge, president and CEO of the Private Equity Growth Capital Council.

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About the Private Equity Performance Update

PEGCC calculates the excess returns from private equity by comparing the median values from third party data providers to the S&P 500 Total Return index.  The research was compiled using data as of June 30, 2012, the most current data available.  All returns are calculated net of fees.