Private equity (PE) is currently considered a very attractive investment opportunity. Last year, there were a total of 2,296 funds in the market, while this year’s third quarter saw that number rise to 3,951. That’s a 72% increase in the number of P.E. funds.
But what makes it that way, and why now? First, we need to talk about public market assets, including liquid ones, their currently apparent volatility, and how that’s contributing to the large move from public to private.
Private Versus Public
According to the Financial Times, private investment beats out public. In a study that looked at data from institutional investors from 1998 through 2018, when compared to stocks and bonds, private investment offered greater returns.
According to Preqin Ltd., a PE data resource, PE assets grew 26% in 2018, from $2.892 trillion in 2017 to $3.58 trillion last year.
The Benefits of Going Private
Mainstream public markets are expected to reduce returns over the next decade. AQR, a quantitative investment group, estimates a return of as little as 2.9% on average per year after inflation, compared with a 5% average since 1900.
As of now in private equity, the more invested, the more returned: Investors that put 15% or more of their exposure towards…
