Public Market Equivalent (PME) in Private Equity
Private markets investments have always presented unique challenges when measuring performance relative to other asset classes. Enter PME. PME analysis allows investors to make direct comparisons between private markets funds and public benchmarks.
When presenting to an investment board, PME allows a limited partner to demonstrate the opportunity cost benchmark of investing in the private markets. LPs are also leveraging this knowledge to evaluate an increase their private markets allocation. The intuition behind the PME, as you’ll see, is simple. The implementation and application, however, can be more challenging.
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