Ares examines whether private-market investors should lean into, rather than retreat from, volatility. Across 2000–2020 vintages, higher-volatility commitment periods produced stronger Net IRRs, TVPIs, and Alpha, with the pattern spanning major asset classes and regions while adding only modest portfolio-level risk.
Navigating Uncertainty: Does Volatility Create Better Vintages?
Ares Management
Research
12 Pages
Key Takeaways
Volatility rewarded: Across private capital, the pro-volatility strategy returned 13.3% Net IRR versus 12.2% for fixed commitments and 11.1% for anti-volatility.
Asset classes agree: Pro-volatility outperformed anti-volatility Net IRR by 4.3 points in real estate, 3.3 in private credit, and 3.2 in buyouts.
Risk barely rises: Across 10,000 simulated portfolios, leaning into volatility added 1.1 percentage points of Net IRR with only 0.1–0.2 points more standard deviation.
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