@article {Beath67, author = {Alexander Beath and Christopher Flynn}, title = {Benchmarking the Performance of Private Equity Portfolios of the World{\textquoteright}s Largest Institutional Investors: A View from CEM Benchmarking}, volume = {30}, number = {1}, pages = {67--87}, year = {2020}, doi = {10.3905/joi.2020.1.155}, publisher = {Institutional Investor Journals Umbrella}, abstract = {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{\textendash}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, statistical methods, style investing, pension fundsKey Findings{\textbullet} 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 three and five months, is sufficient to benchmark most private equity portfolios.{\textbullet} The average private equity portfolio historically underperforms this simple investible benchmark. The average net value added from 1996{\textendash}2018 is -0.67\%.{\textbullet} Costs strongly affect relative performance; low-cost internal direct or co-investment private equity outperforms high-cost fund-of-funds private equity.}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/30/1/67}, eprint = {https://joi.pm-research.com/content/30/1/67.full.pdf}, journal = {The Journal of Investing} }