Pantheon explores how private markets can enhance a global portfolio by improving diversification, return potential, and resilience across cycles. The paper argues private equity’s structural advantages have driven outperformance, with long-term returns exceeding public markets by several percentage points. It also challenges liquidity concerns, suggesting portfolio construction can mitigate them.
Asset Allocation: Private Markets In Global Multi-Asset Portfolios
Pantheon
Andrea Carnelli Dompé, Euan Jones
Research
17 Pages
Key Takeaways
Private Equity Outperformance: Private equity delivered ~3–5% higher annual returns than public equities over long periods, driven by operational improvements and manager selection dispersion.
Diversification Benefits Increase: Blended portfolios with 20% private markets allocation improved risk-adjusted returns, lowering volatility while maintaining higher total returns compared to 100% public equity portfolios.
Liquidity Risk Manageable: Even with 10-year lockups, modeled portfolios maintained sufficient liquidity, with cash flow coverage ratios exceeding 100% under most historical scenarios.
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