STEPHEN CRANSTON: Private equity outperforms, but there are lots of caveats
RisCura warns that PE is different from quoted equity and it is crucial to understand this
Private equity (PE) has certainly proved to give superior returns to the bulk of long-only unit trusts, and, in many cases, ahead of hedge funds too.
As Doug Gower, an analyst for Gaia group says, private equity over 10 years might have underperformed the all share index (Alsi) or even the financial & industrial index (Findi), which is a better proxy given that PE funds almost never invest in mining or other capital-intensive resources businesses. But over three years, PE funds have earned a 2.9% annual premium on the Alsi and 4% on the Findi.