How Does PE Compare to Public Markets? PitchBook’s PME has the Answer
November 04, 2013
PitchBook’s PME+ (public market equivalent) benchmark, which utilizes fund returns from more than 6,400 global funds to compare alternative asset performance against the public markets, has shown that over the last 13 ¼ years, private equity funds have generated a compound annual growth rate (CAGR) of 8.9%, compared to 2.8% for the Russell 3000® Index. Much of the run up in value for PE funds occurred between 2005 and 2008, when funds were distributing unprecedented levels of capital to their LPs, as well as investing record levels of capital at higher valuations and more leverage than ever before. From 2005 through 2007, PE funds posted a CAGR of 27% compared to 4.9% for the Russell 3000®.
The PME+ for venture capital shows quite a different story, with VC funds posting a paltry CAGR of -2.2% as of 1Q 2013, compared to 3.5% in the Russell 2000® Growth Index. The significant drop in value of tech companies after the dot-com bubble burst in the early 2000s has been the main drag on performance. Since then, venture funds have been relatively flat while the Russell 2000® Growth Index was able to recoup the early-decade losses it experienced throughout the middle of the decade.
For more comprehensive analysis of private equity and venture capital fund performance compared to the public markets, click here.
And be sure to check back Wednesday, when PitchBook will publish its 4Q 2013 PE & VC Benchmarking & Fund Performance Report.