Private equity outperforms public markets, says Montana study

The meta-study finds that across three different methodologies most commonly used – IRR, PME (public market equivalent) multiple and PME+/static spread – private equity outperforms public market investments by 3-5% per annum. Of the 14 studies considered overall, 11 studies put private equity ahead of public markets, with the remaining three coming to an opposite conclusion.

Montana's own analysis concludes private equity investments generate a return 1.24x higher than their public market equivalent, which puts private equity 24% ahead of the public market.

Montana's study highlights the safe-haven quality of private equity, largely derived from the thorough structuring and execution of private equity programmes. "It is important to continuously follow one investment strategy. This will pay off in terms of returns and risk premiums," argues Christian Diller of Montana.

Montana's Marco Wulff highlights the benefits of private equity's hands-on approach when it comes to generating consistent returns, but also stresses that discipline is a must to attract investors: "A successful private equity strategy has to follow consistent due diligence guidelines and adjust the benchmarks used according to the market." This way, he adds, private equity promotes relatively low-risk investments in emerging sectors, which take advantage of the changes and innovation in business trends.

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