Private Equity (PE) Performance in The United States

Abstract

We use the Thomson Reuters Venture Capital and Thomson Reuters Buyout indices as proxies for U.S. Private Equity (PE) performance and compare them to U.S. stocks and bonds. Both PE indices have outperformed stocks and bonds and they have higher average and median monthly returns. However, PE indices also had higher risk compared to stocks and bonds. On a risk-adjusted basis, PE has outperformed stocks but underperformed bonds. PE has also created more wealth compared to stocks and bonds. Both the PE indices also have significantly positive four-factor alpha. Our results indicate that PE has created tremendous value.