PT - JOURNAL ARTICLE AU - Alexander Beath AU - Christopher Flynn TI - Benchmarking the Performance of Private Equity Portfolios of the World’s Largest Institutional Investors: <em>A View from CEM Benchmarking</em> AID - 10.3905/joi.2020.1.155 DP - 2020 Nov 30 TA - The Journal of Investing PG - 67--87 VI - 30 IP - 1 4099 - https://pm-research.com/content/30/1/67.short 4100 - https://pm-research.com/content/30/1/67.full AB - 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, statistical methods, style investing, 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 three and five 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.