Private equity funds have recently lagged the S&P 500, raising questions about whether investments aimed at wealthy investors are necessarily better. According to Sina Finance, Cambridge Associates said its private equity index returned 7.4% annually after fees over the three years through March and 9.3% over five years, while funds tracking the S&P 500 returned 18.3% and 12% over the same periods.
Supporters of private investments say they can offer higher long-term returns, access to leveraged buyouts and early-stage opportunities, and broader diversification. According to Sina Finance, Cambridge Associates said its private equity index returned 12.8% annually over the 25 years through 2025, compared with 10% for the S&P 500.
The article also highlights two main risks: illiquidity and higher fees. According to Sina Finance, private equity funds often have fixed holding periods and redemption limits, and traditional private equity fees can include a 2% annual management fee plus 20% of profits above a threshold, although some funds now charge 15% of excess returns.
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