TY - JOUR T1 - Benchmarking the Performance of Private Equity Portfolios of the World’s Largest Institutional Investors: <em>A View from CEM Benchmarking</em> JF - The Journal of Investing DO - 10.3905/joi.2020.1.155 SP - joi.2020.1.155 AU - Alexander Beath AU - Christopher Flynn Y1 - 2020/10/31 UR - https://pm-research.com/content/early/2020/10/31/joi.2020.1.155.abstract N2 - The CEM database contains private equity true-time weighted portfolio returns net of investment costs, along with self-reported benchmark returns for some of the largest institutional investors in the world. To quantify performance, the article uses a consistent benchmarking methodology, employing geographic blends of small-cap equity indexes and showing that the method yields a better benchmark. From 1996–2018, private equity slightly underperforms the benchmark, indicating that the returns for private equity are comparable to those of listed equity.TOPICS: Private equity, performance measurement, equity portfolio management, style investing, statistical methods, pension fundsKey Findings• Of the private equity benchmarks currently used by investors, most are flawed. A benchmarking method using listed small-cap equity, with a lag of between 3 and 5 months, is sufficient to benchmark most private equity portfolios.• The average private equity portfolio historically underperforms this simple investible benchmark. The average net value added from 1996–2018 is −0.67%.• Costs strongly affect relative performance; low-cost internal direct or co-investment private equity outperforms high-cost fund-of-funds private equity. ER -