Buyout funds, within the private markets, will typically invest in companies and aim to improve operations, cut costs and restructure business plans. In some cases, a buyout fund can even help its privately held investments and take them public.

However, many investors often wonder, is the risk of investing in the private markets worth it? We decided to compare private markets buyout funds to the public markets, approximated through the MSCI World index, to find out.

• For all time horizons, buyout’s IRR outperformed the MSCI World PME substantially.
• While SMID and mega/large buyout has similar returns in the past decade, the mega/large sub-strategies have performed better during the 5 and 10 year periods.
  • When Hamilton Lane thinks of mega and large buyout, these would be funds typically $3B or larger.
  • On the other hand, SMID is considered to be funds smaller than $3B.
• Despite the negative impact of COVID-19 on the public and private markets returns, both buyout sub-strategies managed to have positive 1 year returns as of Q1 2020.

Definitions

Mega/Large Buyout – Any buyout fund larger than a certain fund size that depends on the vintage year

SMID Buyout – Any buyout fund smaller than a certain fund size, dependent on vintage year

MSCI World Index – The MSCI World Index tracks large and mid-cap equity performance in developed market countries