Why Manager Selection is Critical When it Comes to Private Equity Investing

November 25, 2024

Private equity may potentially play an important role in an investor’s portfolio, offering potentially strong returns, increased diversification, and expanded investment opportunity.

But a key step to the success of these investments is selecting the right manager. Why? The potential for significant performance variability is far greater in the private markets than the public markets.

Historical data reveals a more than 14% performance differential between the top performing private equity managers and the bottom-performing managers over the past 10 years. For comparison, for public US large-cap equity managers over the same period, the performance difference was 4.8%. Thus, performance dispersion is an important consideration when it comes to private investments and manager selection is critical.