An April 2014 article by McKinsey’s Sacha Ghai, Conor Kehoe, and Gary Pinkus highlights new research that shows private equity has generated better returns than previously thought, as well as Limited Partners’ heightened expectations from their GPs.
New research shows PE returns beat public indices
According to the McKinsey authors, more recent data suggests that over the long term, returns from PE investments have outperformed the public indices by a minimum of 300 basis points. McKinsey’s analysis for the World Economic Forum in 2011, covering funds created in 1995, shows that return from these funds has “meaningfully outperformed” the S&P 500, as per the graph below.
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