Despite recent public market outperformance, private equity's long-term track record and positive outlook offer diversification and potential for significant returns.
In Brief:
- Over the past two years, public markets have outperformed private equity, although recent volatility may have a significant impact on relative results.
- Private equity has consistently delivered better investment results than public markets over the long term, with past episodes of underperformance often followed by extended periods of significant alpha.
- While risks exist, emphasizing the importance of careful investment selection, the outlook for private equity remains positive, offering diversification and the potential for attractive returns on both an absolute and relative basis.
Shifting public markets
In 2023 and 2024, the public equity markets generated strong returns, fueled by the “Magnificent Seven”. However, public stocks have faced challenges so far in 2025 amid concerns around trade policies and geopolitical tensions. This shift underscores the need for long-term oriented strategies like private equity to help navigate market volatility.
There have been only two other instances over the past twenty years when the trailing three-year performance of public stocks exceeded private equity.
Stability amidst market volatility
Historically, private equity has often delivered superior performance when compared to public markets over longer time frames. While public markets may occasionally close the gap in the short term as they did in 2023-2024, data shows that after periods of public market gains, private equity tends to bounce back and generate significant alpha. This pattern implies that private equity could be a more durable asset class in the long run, as illustrated in the chart, which shows that there have been only two other instances over the past 20 years when the trailing three-year performance of public stocks exceeded private equity. Both of these public market peaks were followed by several years when private equity re-established its track record of outperformance.
About the J.P. Morgan Private Equity Group
Led by a global team of over 65 professionals operating from New York, London, Hong Kong and Mumbai, the J.P. Morgan Private Equity Group (PEG) manages $35 billion of assets on behalf of a diverse group of leading institutions and individual investors. Founded in 1980, PEG is one of the longest-standing platforms in the industry. Over the past 45+ years, PEG has cultivated a deep network of general partner (GP) relationships and sits on over 220 advisory boards. PEG’s collaborative partnerships with top-tier GPs and continued participation in primary investments also make it a preferred strategic partner for co-investment and secondary opportunities.