J.P. Morgan examines the ongoing debate over whether private equity truly outperforms public markets, breaking down conflicting methodologies, benchmarks, and assumptions that drive very different conclusions. The paper suggests private equity still leads overall, but the edge is narrowing, with one dataset showing a 0.99 PME over 2006–2015, challenging the industry narrative.
Food Fight: An Update on Private Equity Performance vs Public Equity Markets
J.P. Morgan Asset Management
Michael Cembalest
Research
26 Pages
Key Takeaways
Outperformance Still Exists: Private equity PME exceeded 1.0 across most periods from 1996–2015, with buyout-focused strategies reaching 1.05–1.11 depending on benchmark choice.
Benchmark Choice Matters: Using Russell 2000 instead of S&P 600 lifts PME from 1.05 to 1.11, highlighting how index selection can shift conclusions by ~6%.
Return Assumptions Debate: Required earnings growth to outperform ranges from 10% to 50% over 4 years depending on whether debt paydown is included.
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