Chart of the week

Private equity has historically outperformed public markets

The Mag 7 makes all the headlines, but private equity has quietly outperformed the S&P 500 over the past 5-, 10-, 15-, and 20-year periods.

Return comparison: Private vs. public equity

Column chart showing returns on the Pitchbook North American Private Equity Index vs. the S&P 500 over the 5-, 10-, 15-, and 20-year periods ended December 31, 2023. Over each time period, the Pitchbook Private Equity Index handily outperformed the S&P 500 Index.

Source: Pitchbook, as of December 31, 2023, latest data available.  

  • The strong headline returns for U.S. stocks this year mask the realities beneath the surface.
    • Investing in the S&P 500 increasingly implies a concentrated bet on a small group of large cap U.S. tech and tech-related firms—these Magnificent 7 stocks account for more than 30% of the index’s weight and an astounding 61% of its year-to-date return.1
    • Meanwhile, small- and mid-cap stocks have only managed to eke out a flat year-to-date return (0.46%) as the percentage of small-cap public companies generating negative earnings has increased from approximately 25% in 2012 to 41% today.1
  • There is a large, often untapped opportunity set outside the public markets: The number of private companies has increased 43% over the last several decades while the number of public companies has declined -35%.2
  • As the chart shows, private equity funds have outperformed the S&P 500 over the long-term.3 In exchange for these compelling returns private equity investors give up the level of liquidity and transparency inherent to public markets.
  • Private equity investing has historically been the domain of large institutions, such as pension funds and endowments, due to the high investment minimums and strict suitability requirements.
  • However, there are a growing number of investment vehicles available to help individuals address many of these historical challenges as asset managers focus on expanding access to private equity. 

  • Bloomberg Finance L.P., as of June 13, 2024. Small- and mid-cap stocks represented by the Russell 2000 Index.

  • World Bank; U.S.-based listed companies for years 1988-2019.

  • Pitchbook North American Private Equity Index, as of December 31, 2023, latest data available.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

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