Private Equity Returns Far Exceed Declining Market Returns On Multiple Time Horizons

WASHINGTON – The Private Equity Growth Capital Council (PEGCC) released its Performance Update Report today, which shows private equity returns continue to outperform public markets on both short- and long-term time horizons. The report highlights private equity fund performance as of Q3 2015 and analyzes the extent by which private equity outperformed the public markets and pension returns from private equity investments during these periods.

According to the report, the median private equity benchmark reported returns of 6.4 percent for the year ending September 30, 2015, surpassing the performance of public market returns of -0.5 percent and -0.6 percent for the Russell 3000 and S&P 500 Indices, respectively. The median private equity benchmark outperformed public markets on a 3-year, 5-year, and 10-year basis, as well. Over a 10-year horizon, the median private equity benchmark achieved an 11.8 percent annualized return, almost doubling the S&P 500 returns of 6.8 percent.

“The findings in this report are further evidence of the industry’s ability to outperform investments in  public markets,” said PEGCC President and CEO Mike Sommers. “Throughout our country, pension funds use private equity to provide retirement security for American workers who rely on consistent, strong returns regardless of market conditions.”

Moreover, the report shows that the performance of pensions’ private equity investments far exceed public markets for the one, three, five, and 10-year timespans. For example, the Massachusetts Pensions Reserves Investment Trust Fund, which has $6.94 billion (or 11.8 percent) of its pension fund invested in private equity, saw double-digit returns over these periods, with a remarkable 20.4 percent annualized return over the past three years. In fact, the median pension’s private equity performance exceeded the median benchmark for the 1-, 3-, and 5-year time horizons.

“Fund returns for the third quarter of 2015 illustrate the trend of private equity withstanding variable market activity,” said Bronwyn Bailey, PEGCC’s Vice President of Research. “Private equity not only helps investors experience above average returns during booming markets, but long-term capital also acts as a safe harbor for investors during periods of volatility.”

Read the full report here.

Highlights of the report include:

1-Year Returns:

  • Median private equity benchmark: 6.4%
  • Median pension fund private equity investments: 10.7%
  • Russell 3000 Index: -0.5%
  • S&P 500: -0.6%

3-Year Returns:

  • Median private equity benchmark: 14.1%
  • Median pension fund private equity investments: 15.4%
  • Russell 3000 Index: 12.5%
  • S&P 500: 12.4%

5-Year Returns:

  • Median private equity benchmark: 14.4%
  • Median pension fund private equity investments: 14.8%
  • Russell 3000 Index: 13.3%
  • S&P 500: 13.3%

10-Year Returns:

  • Median private equity benchmark: 11.8%
  • Median pension fund private equity investments: 11.5%
  • Russell 3000 Index: 6.9%
  • S&P 500: 6.8%