Private equity outperformed S&P 500 most of the time

As communities around the country struggle to fund the retirements of their public employees, pension funds have looked to private equity for its consistent outperformance of public markets, bolstering pensions’ portfolios across the country. 

The Private Equity Growth Capital Council (PEGCC) released a new analysis of returns provided by private equity investments compared to the S&P 500.  Based on the analysis of private equity benchmarks, private equity outperformed (net of fees) the S&P 500 for 1, 5 and 10-year time horizons by 1.8, 3.7 and 7.0 percentage points, respectively.  Private equity underperformed the S&P 500 during the 3-year time horizon due to the index’s historic dip during the financial crisis, which inflated the S&P 500’s gains during this period, the report said.

“The data released today highlights the consistent outperformance of private equity compared to public markets,” said PEGCC President and CEO Steve Judge. “The benefits of private equity returns to the pensions, charitable foundations and university endowments are clear.  No other asset class provides the consistently superior returns of private equity, helping to secure the retirements of millions of teachers, firefighters and police.”

Private equity investments delivered similar returns (net of fees) to public pensions.  PEGCC analysis of recently published data from eight pension funds shows median private equity returns exceeded the S&P 500 for 5 and 10-year time horizons by 4.2, and 7.0 percentage points.

“This analysis shows that, on a ten-year basis, private equity returns are nearly triple of the gains by the S&P 500.  Providing superior investment performance over long time horizons is a hallmark of private equity, and it is unmatched by any other asset class,” said Bronwyn Bailey, PEGCC vice president of research.

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 March 31, 2012, the most current data available.  All returns are calculated net of fees.

The private equity industry in the U.S. comprises nearly 2,600 investment firms. They operate nearly 15,300 U.S.-based businesses in all 50 states and all Congressional districts. These companies employ approximately 8.1 million people. In 2011 alone, U.S. private equity firms invested nearly $144 billion in more than 1,700 U.S.-based companies. The private equity industry has distributed over $1 trillion to its limited partner investors over the past three decades.

The Private Equity Growth Capital Council (PEGCC) is an advocacy, communications and research organization and resource center established to develop, analyze and distribute information about the private equity and growth capital investment industry and its contributions to the national and global economy.


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