Over the last four years, financial markets have been subject to a series of shocks that have had far-reaching implications. From the global pandemic and subsequent shutdown of major economies to recent geopolitical tensions, the market environment has been rife with uncertainty. Amidst this turbulence, private equity still managed to deliver impressive absolute and relative performance. Over the period 2019 to 2023, global private equity experienced 16% annualised performance, outperforming the MSCI ACWI gross index by 8%.
Has private equity simply been fortunate during this recent period, or has its success extended to other crises? Using periods of elevated volatility to identify crises, the past 25 years saw five major financial crises: the Dotcom Crash, the Global Financial Crisis (GFC), the Eurozone Crisis, the COVID-19 Outbreak, and the Return of Inflation.
Global private equity outperformed the MSCI ACWI Gross Index during each of the major disruptions with an average annualised excess return of 8%.
When comparing performance to the S&P 500 Total Return Index, global private equity has also consistently outperformed during all five crises, with an average outperformance of 4%.
Global private equity has delivered a compound annual return of 12% over the last 25 years, outperforming the MSCI ACWI Gross, MSCI World Gross, and S&P 500 Total Return indices. The key driver behind this outperformance has been the resilience of private equity during crises. Private equity delivered an annualised excess return of 8% during the five crises and half this during undisturbed periods.
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