PE returns fell in Q3 of 2015

Despite a drop, the median private equity benchmark outperformed public market returns in the third quarter of 2015 according to PEGCC research.

Private equity returns fell in the third quarter of 2015 from the previous quarter but the alternative asset class still outperformed public markets, according to Private Equity Growth Capital Council's latest quarterly performance update report.

PEGCC's median private equity benchmark, which excludes venture capital, reported returns of 6.4 percent for the year ending 30 September 2015, down from 9.2 percent as of the second quarter. It surpassed one-year public market returns of -0.5 percent and -0.6 percent for the Russell 3000 and Standard & Poor's 500 indices, respectively. 

This contrasts with performance from a year ago, when the median private equity benchmark returned 18.1 percent for the same period ended 30 September 2014, outperforming the Russell 3000, which returned 17.8 percent, but underperforming the S&P 500, which generated a 19.7 percent return.

On a 10-year basis, the median private equity benchmark returned 11.8 percent as of 30 September, down from 13 percent as of 30 June, but still above the Russell 3000's 6.9 percent return and the S&P 500's 6.8 percent return as of 30 September.

“On a 10-year basis, private equity performs better than the public markets,” said Bronwyn Bailey, PEGCC's vice president of research. “Public markets in the long-term lose or gain value, but private equity has stronger returns and is more stable.”

Pension funds' private equity investments exceeded the private equity benchmark for one-, three-, and five-year time spans in the third quarter . In Q3 2014, pension fund private equity investments only outperformed the private equity benchmark in the one-year time span at 21.5 percent versus 18.1 percent. In the three-, five- and 10-year spans in that year, the benchmark outperformed the pension fund returns.