Research

Diversify your portfolio with private equity

Correlation between private and public equity

Summary

  • Private equity portfolios not only offer a source of attractive return, but also diversify investors’ equity allocation when constructed properly
  • Over the past 15 years, the average correlation between the European and US buyout markets and public equity has been 80%. Over the same period, the correlation of the European buyout market has been lower than that of the US buyout market
  • Concentrated private equity portfolios exhibit lower correlation. With a deliberate fund selection process, over-diversification can be avoided
  • We believe that the fundamental differences in the private and public equity investment models will remain, implying that the diversification benefits of investing in private equity will persist in the future