Recent trends indicate that institutional investors in private equity are struggling to maintain outperformance compared to public markets. This shift is attributed to a decline in the persistence of performance among private equity managers, raising questions about the rationale for continued allocations to this asset class. Investment committees are advised to critically evaluate their manager selection processes and expectations.

• 01Institutional investors are experiencing a decline in private equity performance relative to public markets, challenging previous assumptions of outperformance.
• 02Research indicates that the historical persistence of performance among private equity managers has significantly diminished since 2000.
• 03Investment committees should critically assess their confidence in selecting top-performing private equity managers before committing capital.
• 04High fees associated with private equity investments may not justify the potential returns, particularly if confidence in manager selection is lacking.
• 05The article emphasizes the importance of documenting investment beliefs and regularly reviewing them to avoid performance chasing.

The decline in private equity performance could lead to reduced returns for institutional investors, affecting their overall portfolio performance and financial health.