The public market equivalent and private equity performance

We provide a formal and rigorous justification for the Kaplan and Schoar (2005)public market equivalent (“PME”) measure of historical performance of private equity (“PE”) funds. The PME provides a valid economic performance measure when the investor (“LP”) has log-utility preferences and the return on the LP’s total wealth equals the market return. Notably, the PME is valid regardless of the risk of PEinvestments, and it is robust to variations in the timing and systematic risks of the underlying cash flows along with potential GP manipulations. Formally, we show that the PME is a generalized method-of-moments estimator using the stochastic discount factor implied by Rubinstein (1976)’s version of the capital asset pricing model.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.


Missie en strategie           •           Netwerk           •           Organisatie           •          Podcasts
Board Brief            •            Werkprogramma 2023-2027           •           Onderzoeksagenda


Onze partners

B20160708_universiteit leiden
BPL_Pensioen_logo+pay-off - 1610-1225 v1.1_grijswaarden
Bekijk al onze partners