Returns vary significantly by strategy, fund vintage and manager quality. High averages can mask wide dispersion.
“In 2025, top-quartile global buyout funds averaged 8% returns. This was less than half of the S&P 500’s 18% for the same period.” McKinsey, Global Private Markets Report 2026, February 2026
This comparison demands context. Private equity operates on a 5 to 7 year horizon. Short-term comparisons with public markets can be misleading. The relevant metric is long-term net returns after fees, measured against a public market equivalent.
Over 10-year cycles, top-quartile PE funds have historically outperformed public markets. But the gap has been narrowing. Higher rates between 2022 and 2024 reduced leverage efficiency. Operational value creation has become the primary return driver.
Another challenge: 52% of buyout-backed companies globally were held for more than four years by 2026, according to McKinsey. This overhang of unsold assets is creating distribution pressure. Investors should expect longer holding periods before capital is returned.
Professional Insight from Hexagone Group
When evaluating a private equity allocation, Hexagone Group advises clients to look beyond headline IRR figures. Vintage year, fee structure, manager track record and underlying sector exposure all affect actual net returns. recommends assessing private equity as part of a broader, multi-asset strategy rather than as a standalone allocation.
