Private equity net returns exceeded those of public equity by a yearly average of 4 percentage points over the past 19 years, a study of 53 U.S. public pension plans by alternative investment consultant Cliffwater showed.
The plans earned a net annualized private equity return of 9.6% from June 30, 2000 to June 30, 2019, compared to a 5.6% annualized return of a public equity benchmark, according to the study of pension plans that reported private equity returns for all or part of the study period and had a fiscal year ended June 30. The study period includes two full stock market cycles.
The public equity benchmark used in the study — an update of a Cliffwater study released three years ago — was the weighted average of the Russell 3000 index (70%) and the MSCI ACWI ex-U.S. index (30%), rebalanced annually. The weightings represent the typical mix of U.S. and non-U.S. private equity investments in large diversified portfolios, the study said.
Cliffwater's study also found no evidence that private equity and public equity returns are converging. Using a regression analysis, Cliffwater found that private equity's excess returns over the public markets did not diminish over time.