Title: Private Equity vs. the S&P 500: A Decade of Diverging Growth and Risk-Adjusted Returns

For Ten Years Private Equity has Return An Average of 4% More Per Year Then the S&P 500

Over the last decade, private equity has evolved from a niche asset class to a dominant force in global investing, reshaping industries, driving innovation, and attracting unprecedented capital inflows. While the S&P 500 remains a benchmark for public market performance, private equity has increasingly become the go-to for institutional investors and high-net-worth individuals seeking higher returns, albeit with different risk profiles and liquidity constraints.

Performance Overview: Private Equity Outpaces Public Markets

From 2014 to 2024, private equity returns have generally outperformed the S&P 500 on a net basis, especially when measured using internal rate of return (IRR) and multiple on invested capital (MOIC). According to Bain & Company and Pitchbook data:

• Private Equity IRR (2014–2024): Averaged 13%–16% annually (net of fees)
• S&P 500 Total Return (2014–2024): Averaged 10%–11% annually (including dividends)

This performance gap reflects private equity’s ability to leverage control positions in portfolio companies, use operational improvements, and apply financial engineering strategies (like leverage and tax structuring). In particular, mid-market buyouts and growth equity strategies have delivered standout returns in tech, healthcare, and logistics.

Capital Inflows and Fundraising Trends

Private equity fundraising has surged since 2014, culminating in a record $1.2 trillion raised globally in 2021, before moderating in 2023–2024 amid higher interest rates and geopolitical instability. Notably:

• Assets under management (AUM) in private equity exceeded $8 trillion globally by 2024, up from around $3 trillion in 2014.
• Dry powder (unspent capital) reached nearly $2.6 trillion in 2024, indicating both investor confidence and heightened deal competition.

The appeal? Long-term investors like pension funds and sovereign wealth funds are drawn to private equity’s potential for alpha generation in a low-yield, inflation-hedging environment.

Liquidity and Risk: The Trade-Offs

Despite superior historical returns, private equity presents trade-offs compared to public markets:

The illiquid nature of private equity means investors must tolerate long holding periods and rely on quarterly NAV reporting, often using subjective valuation models. By contrast, the S&P 500 offers instant diversification, pricing transparency, and accessibility.

Recent Headwinds and the Public Market Rebound

In 2022–2023, rising interest rates and a pullback in IPO markets hurt private equity exit activity. Valuations declined, deal volumes fell, and holding periods lengthened. Meanwhile, the S&P 500 rebounded in late 2023 into 2024, driven by strong performance in AI, semiconductors, and consumer tech, narrowing the return gap temporarily.

Still, PE firms have adapted with creative continuation vehicles, private credit, and minority growth deals to stay active in a higher-rate world.

Conclusion: Complementary, Not Competing

Over the past decade, private equity has clearly outperformed the S&P 500 for those who could access and tolerate its unique characteristics. But it is not a direct replacement. Instead, investors increasingly view private equity as a core part of a diversified portfolio, offering high-return potential with a different set of risks and constraints.

As capital markets evolve and private markets grow in sophistication, expect the lines between public and private investing to blur further—with crossover funds, direct listings, and democratized access through interval funds and tokenized assets.

For now, the verdict is clear: private equity has had the better decade—but only for those willing to play the long game.

Sources:

• Bain & Company Global Private Equity Reports (2014–2024)
• Pitchbook Data, Preqin, Cambridge Associates
• S&P Dow Jones Indices Total Return Data
• McKinsey Global Private Markets Review