Buyout Performance with Assets Valued at Market

Market-priced buyout investments appear far riskier and more equity-like than their smoothed NAVs suggest, with no statistically meaningful evidence of positive alpha.

• Over the 20 years to June 2025, listed private equity volatility was approximately 29% at market prices versus 19% using NAVs, compared with 16% for global public equities.
• During the year to June 2009, MSCI ACWI fell 29%; listed private equity NAVs declined 46%, while market prices fell 69%.
• Market-price correlation with global equities was 0.94 versus 0.81 using NAVs, and the estimated beta to the MSCI World Index was approximately 1.5, with an R² of 88%.
• Estimated beta rose from 0.40 with daily returns to 0.93 monthly, 1.28 quarterly, 1.47 annually and 1.55 biennially, while explanatory power increased from 22% to 96%.
• CAPM alpha was estimated at -4.2% annually but was not statistically significant; a three-factor model produced alpha of -3.0%, also statistically insignificant, while rolling 10-year regressions consistently found no positive alpha.

Takeaway: Investors should model buyout equity as a highly levered, equity-like exposure rather than a low-volatility diversifier, and assess its returns against the higher systematic risk, illiquidity, fees and complexity it entails.