600-700 Basis Points of Premium for the Past 10 to 15 Years

Nov 2013 by Dan Vene

According to Cambridge Associates U.S. Private Equity Index Summary1, over the past 10 years private equity returns have outperformed the S&P 500 by 668 basis points annually (14.12% vs. 7.44%) and over the past 15 years by 592 basis points annually (11.33% vs. 5.41%).

While these figures are pretty outstanding in their own right, also keep in mind most individual and institutional investors haven’t even come close to matching the S&P 500′s results:

  • 87% of institutional mutual fund managers underperformed the S&P 500′s return over the past 5 years. Source: S&P Dow Jones2
  • Over the past 20yrs the average mutual fund return is approximately 6%, while the average investor within the average mutual fund experienced returns closer to only 4% due to poor timing on buy / sell decisions

Many investors are averse to the long duration (term) of private equity funds but longer term, more patient capital, is precisely what most investors need.

One of the top-ranked investment track records in the industry was compiled by Jeffrey Tannebaum of Fir Tree Partners, who talks at length about the importance of patient capital. You simply can not time the market and produce superior results. So why try? Invest your capital with the best managers you can find, check for proper alignment of interest (i.e. managers paid for producing superior performance and not just by annual mgmt fees) and sit back and relax. When you look back 5-10yrs later you will realize it was one of the best financial decisions you’ve ever made.





This communication and all data contained herein are provided for informational purposes only and do not constitute a recommendation to buy or sell any security. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources iCapital Network believes to be reliable. However, iCapital Network cannot guarantee that data’s currency, accuracy, timeliness, completeness or fitness for any particular purpose and has not sought to independently verify such data. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind that investing in alternative assets involves substantial risk, including the risk of losing your entire investment.