There are few absolutes in this world and benchmarking financial markets certainly isn’t one of them. Even in the liquid, deep and transparent public markets arena, there is no such thing as a perfect index, so one would expect the situation to be even more challenging in an unlisted context. In fact, if you know where to look, private equity benchmarking is achievable and can even rival that of its more liquid cousin for breadth and relevance.
As our analysis shows, primary fund of funds performance data from Pevara is demonstrably as representative of private equity as most major indexes are of public markets. Given that basis, the risk-return profile of private equity appears to be significantly better than is sometimes portrayed in academic and media debates. But there is a third dimension to the asset allocation challenge: liquidity. Managing for this is where smart and experienced limited partners really demonstrate their skill.
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