July 25, 2018
Public market comparisons help investors evaluate the success of their private markets portfolio relative to other asset classes. In other words, they help evaluate the opportunity cost of foregoing an investment in publicly traded instruments in order to make an investment in a private markets portfolio. They can also be used to evaluate whether a manager has demonstrated investment skill or is a beneficiary of rising global markets.
The challenge with public market comparisons is that private market returns are usually quoted using a different metric (IRR) than public market returns (TWR). Experienced analysts are careful to avoid mismatched comparison metrics, using one of the two techniques below to put these two asset classes on an equal playing field.
To learn more about the challenges of benchmarking in the private markets, click the button below to access our Benchmarking White Paper.