Despite fundraising volatility in the first half of 2020, total assets under management (AUM) across private markets continued its march upward and grew 5.1 percent to another all-time high of $7.4 trillion, according to a McKinsey & Co. report. AUM saw increases in most asset classes, with private equity (PE) accounting for the largest growth.
Over the longer term, private equity has remained the highest-returning asset class in private markets since 2006. Median performance to date of PE funds raised between 2007–2017 is 13.3 percent net IRR. But the real prize in PE, as many LPs see it, is the potential for outperformance above median. The top-quartile cutoff for the 20072017 vintage period, for instance, is a net IRR of 21.3 percent. In PE, some firms significantly outperformed the rest of the pack. Additionally, the risk of underperformance has been lower over this period, with bottom-quartile PE funds returning well above other private market asset classes.
