Analysis of Private Equity vs Public Equity Performance

This technical report investigates the performance of private equity in comparison to public equity, focusing on buyout and venture capital returns over the past 30 years. The authors, Ashley Lester, Luis O’Shea, and Patrick Warren, present new evidence indicating that private equity investments have generally outperformed public market equivalents. They utilize a methodology that includes adjustments for geography, leverage, subindustry composition, and size to ensure a fair comparison. The report finds that buyout funds have delivered an annualized excess return of 3.8% since 1994, while venture capital has yielded 2.0%. The authors emphasize the importance of using an index that accurately reflects the risk profile of private equity when making these comparisons. Additionally, they detail their data sources, which include a comprehensive dataset covering thousands of funds and portfolio companies, and outline their approach to calculating direct alphas, which measure the performance of private equity relative to adjusted public equity indexes.