Private Equity Basics #34: Evidence that “Buyout Funds Delivered Alpha of About 5.5% Per Annum; Venture Capital Performed Poorly”

“Over the full sample period, private equity returns display three factors: market beta of less than one, small transaction size and growth, and a four-quarter lag behind public markets. Buyout funds delivered alpha of about 5.5% per annum; venture capital performed poorly. Closer examination reveals that these estimates are inconsistent over time, cautioning against extrapolation from historical averages.”

From Frank Jian Fan, Grant Fleming, and Geoffrey J. Warren, “The Alpha, Beta, and Consistency of Private Equity Reported Returns,” Journal of Private Equity 16(4):21-30, Fall 2013.

Comments and dialogue are welcome, especially if you know of additional high-quality empirical research!