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				<div class="et_pb_text_inner">This original CEM research was published in the December 2020 edition of the Journal of Investing. To get a copy of the article’s reprint, just click the download button below.<br />
ABSTRACT<br />
The CEM database contains private equity true-time weighted portfolio returns net of investment costs, along with self-reported benchmark returns for some of the largest institutional investors in the world. To quantify performance, the article uses a consistent benchmarking methodology, employing geographic blends of small-cap equity indexes and showing that the method yields a better benchmark. From 1996-2018, private equity slightly underperformed the benchmarks, indicating that the returns for private equity are comparable to those of listed equity.<br />
KEY FINDINGS</p>
<p>Of the private equity benchmarks currently used by investors, most are flawed. A benchmarking method using listed small-cap equity, with a lag of between three and five months, is sufficient to benchmark most private equity portfolios.<br />
The average private equity portfolio historically underperformed this simple investible benchmark. The average net value added from 1996-2018 is -0.67%<br />
Cost strongly affects relative performance; low-cost internal direct or co-investment private equity outperforms high-costs fund-of-funds private equity.</p>
<p>TOPICS<br />
Private equity, performance measurement, equity portfolio management, style investing, statistical methods, pension funds*</div>
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