Tracking Private Equity: Closing the Performance Gap

Blog post
3 min read
September 30, 2025
Key findings
  • Replicating fundamental characteristics of private equity in the public markets can explain about half the performance gap between public and private equity.
  • Globally, sector tilts and fundamentals such as growth have explained about 200 basis points (bps) of the 450 bps of outperformance.
  • Investable public equity indexes based on MSCI’s fundamental private capital dataset can help investors by bringing greater transparency to the drivers of private equity’s performance.

Private equity performance can’t be replicated exactly in the public markets, but fundamental drivers of private equity performance can be found there. The sector tilts and exposures to growth, small cap, leverage, etc. aren’t surprising. What may be surprising is how much these exposures have contributed to performance. 

Global private equity has outperformed public equity by about 450 basis points (bps) per year over the past two decades.1 Our analysis, based on MSCI’s deal-level fundamental dataset, suggests that less than 100 bps were due to higher leverage or market beta, while 200 bps can be attributed to sector allocations and replicable factors such as growth.

Fundamental characteristics explain a large share of private equity’s outperformance

The performance of the return tracker index has been intermediate to the global private and public equity markets. Index levels reflect the return in USD.

Replicable exposures explain an even larger share of some segments’ performance. For North American venture capital, our public equity tracker index has nearly matched the private-market performance, after fees.

Some have interpreted private equity’s performance as little more than levered-up public equity, hidden behind smooth valuations and reduced by high fees.2 Others have noted the influence of direct management of investment companies, and skill at deal selection and timing.3 Scarce data has made it difficult to settle the debate.

A more transparent dataset of private equity fundamentals now makes it possible to unpack the drivers of private equity’s performance to separate what can be replicated in the public markets from the unique influence of private equity management.

The result is an index that can be used to demonstrate the value-add of private equity, and which enables investable public market trackers reflecting many of the drivers of private equity performance.

The tracker index is public: It provides investors the access, liquidity and transparency of the public markets, though with neither the management fees nor management skill many private funds have demonstrated. 

Fundamental characteristics explain a large share of private equity’s outperformance

The return tracker indexes represent an intermediate level of accessibility between private equity and the broad public equity market. 

What is investable?

The return tracker indexes represent an intermediate level of accessibility between private equity and the broad public equity market. 

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Tracking Private Equity. Understanding the fundamental drivers of private equity performance.

MSCI’s new deal-level fundamentals and private markets returns data can be used to separate what can be replicated in the public markets from the unique value added by private equity.

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MSCI World Private Equity Return Tracker Index

Target private equity-like returns with the liquidity of public markets with an innovative index designed to reflect the systematic drivers of private equity performance.

1 The average annual return of the MSCI Private Equity Index was 12.3% between December 2006 and December 2024, compared with 7.8% for the MSCI World Investable Market Index (IMI) over the same period. The private equity benchmark reflects the net-of-fees return of buyouts, venture and growth capital in global developed markets, relative to a USD numeraire. 

2 Ludovic Phalippou, “An Inconvenient Fact: Private Equity Returns & The Billionaire Factory,” University of Oxford, Saïd Business School Working Paper (2020). 

3 Robert S. Harris, Tim Jenkinson, and Steven N. Kaplan, “Private Equity Performance: What Do We Know?” Journal of Finance 69, no. 5, (2014): 1851–1882.

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