Preqin: Public Markets Beat PE Returns

The S&P 500 and other major stock indices topped private equity performance in Preqin’s latest data.

(May 6, 2013) - Investors would have been better off with public equity indices than private equity investments for the year ending September 30th, 2012, according to Preqin's most recent figures. 

Over those four quarters, the tracked private equity firms in aggregate returned a solid 13%. The S&P 500, however, more than doubled that performance, with gains of 30.2%.

Public market returns were not quite so strong for stocks in the non-American indices-but they still topped private equity. The MSCI Europe grew 17.3%, and the MSCI Emerging Markets index added 16.9%.

Preqin's data covers the net-to-limited partner performance of over 6,200 private equity funds spanning a range of strategies and geographic focuses. According to the firm, its research takes into account 70% of the funds ever raised by the industry in terms of aggregate value.

The data shows buyout funds having the strongest one-year period of any other major strategy, returning 15.8%. Buyout-focused managers have in fact been on top for the last decade: Preqin's data places the strategy above venture capital, fund of funds, and mezzanine capital for 3-, 5 -, and 10-year returns. 

"Returns from buyout funds and all private equity follow each other closely," the report noted. "With buyout funds accounting for the largest amount of capital in the private equity industry, it is no surprise to see such a high correlation. Venture funds follow a similar pattern but to a lesser extent, with smaller losses during the downturn and smaller gains once the industry began to recover."

Mezzanine has been the weakest performer, with one-year returns of 3.6% and gains just shy of 10% over the three years ending in September, 2012. 

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