The benchmarks employed by certain institutional investors fail to capture the performance and risk attributes of the private equities market. This leads to incorrect assessments of risk-adjusted performance.

A new Scientific Infra & Private Assets (SIPA) report entitled “Rethinking Benchmarks: Listed Equities Benchmarks Continue to Misrepresent Pension Fund Private Equities Performance” states that the private equities market is large and mature and should be evaluated against a benchmark that reflects that underlying market.

Pension fund leadership, trustees, and beneficiaries may not be well-informed about how their private equity portfolios are performing.

Looking at eight large Canadian pension plans (known as the “Maple 8”), we show that when using the private2000® index, recent private equities performance at these eight pension plans is very much in line with or exceeding the market. Importantly, the relative performance cadence over the prior 5 years looks very different than when compared to listed equities benchmarks.