April 26, 2019
Private Markets vs Public Indices
- Comparing an IRR to a PME (Public Market Equivalent) helps investors better understand the performance of private markets against public indices, specifically for private market funds.
- The above chart shows how the aggregate private market fund performance from each vintage year compared to the ACWI IMI index.
- Except for 2010, all private market vintages from 1999 – 2016 outperformed their public benchmarks.
- Also, notice that the lowest years for IRR were 1999 and 2006. Limited Partners tend to commit greater amounts of capital prior to a recession and lesser amounts during recessionary periods.
- It is important for investors to consistently commit capital over several vintage years as to prevent over-exposure to an underperforming vintage.
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