RT Journal Article SR Electronic T1 Practical Applications of Why Invest in Private Equity? A Comparison of Private Equity and Stock Market Returns JF The Journal of Alternative Investments FD Institutional Investor Journals SP 1 OP 5 DO 10.3905/jai.22.s1.004 VO 22 IS Supplement A1 Kevin Marchel A1 Garen Markarian YR 2019 UL https://pm-research.com/content/22/Supplement/1.4.abstract AB In Why Invest in Private Equity? A Comparison of Private Equity and Stock Market Returns from the Summer 2019 issue of The Journal of Alternative Investments, authors Kevin Marchel and Garen Markarian (of the WHU–Otto Beisheim School of Management in Vallendar, Germany) demonstrate that some stock market investments can produce earnings nearly as high as those of private equity (PE), at a lower cost. PE is recognized as offering superior annual investment performance, but it is costly and illiquid because investors must pay fees, share profits, and lock in their money for at least five years. The authors constructed five types of hypothetical stock market portfolios and analyzed performance data from 1965 to 2015 to determine how the portfolios would have performed.They found that a levered “All Stocks” portfolio (that is, a partially debt-financed portfolio of all stocks available on the market) produced annual returns of 13.2% over the 50-year period—just under PE’s annual return of 14.2%—and outperformed PE during bull markets. These findings offer new possibilities for investors, who may be able to realize earnings on par with PE without having to pay extra fees or lock up their money for 5 to 10 years.TOPICS: Private equity, security analysis and valuation, performance measurement