hamilton lane logo

2023 Market Overview

Home

Performance

Where Are We Now?

It’s the age-old question: Should you be investing in the private markets in this environment? Our answer is simple. Just look at private assets’ outperformance by market cycle.

Long-Term Returns

During periods of downturn and uncertainty, it’s easy to focus on short-term actions and perspectives. It would also be the wrong approach. Let us bring you back to the longer-term outlook, where one year of investment performance looks like a mere blip on a chart.

Let us follow the road to the Emerald City, and remember to take the long view on our journey.

15-year asset class performance
annualized time-weighted return as of q3 2022

Here we have a 15-year snapshot capturing what’s arguably been a period of outstanding public equity and credit performance. Yet, private equity and credit outperformed. Handily. A 15-year snapshot, while important, only captures a single point in time, whereas the chart below looks at 10-year rolling averages.

ALL PRIVATE EQUITY 1O-YEAR ROLLING TWRS

We’ll argue this is the most relevant way to look at overall performance. You can see that there are rare instances where public markets have outperformed private markets, but they remain just that – rare. Over the vast majority of 10-year periods, private equity outperforms by meaningful margins. The noteworthy feature here is that this is all private equity. This isn’t top quartile or some curated group of funds. This is you and me investing in everything out there. No cherry picking.

And now here it is. The winner, once again, of this year’s top chart of the Market Overview. It has been the greatest chart of multiple market overviews and so should rightly be classified as the G.O.A.T.

It is the Lionel Messi of charts, the Serena Williams of data, the Michael Jordan of analysis.

BUYOUT IRR VS. PME
BY VINTAGE YEAR

Another chart that you have no doubt framed and given as a wedding or birthday present on multiple occasions; one that shows that buyout has outperformed global equities in every one of the last 22 vintage years by an average of 1,283 basis points.

We get asked, every year, whether now is the time to invest in private equity. Every year. And this chart has provided the answer for the last 22 years. Will the next 22 prove the same? No one knows for sure, but do you really want to bet against an investment that has outperformed like this in every one of the last 22 years?

We don’t. You shouldn’t either.

Let’s consider the performance evidence for private credit investments.

PRIVATE CREDIT IRR VS. PME
BY VINTAGE YEAR

Sure, it’s not 22 for 22, but 21 out of 22 is not a bad scoring average either. You know a lot of footballers who complete over 95% of their passes? Basketball players who make 21 out of 22 shots? We didn’t think so. Real estate and infrastructure have done well, but were hurt during the GFC, particularly real estate.

REAL ESTATE IRR VS. PME
BY VINTAGE YEAR

INFRASTRUCTURE IRR VS. PME
BY VINTAGE YEAR

It will be interesting to see how these strategies perform if this current downturn lasts for an extended period. Our view is that the lessons of overleverage were likely learned by most participants during the GFC; we’re not seeing those capital structures and, therefore, we’re more likely to see better returns in a difficult environment.

Definitions and Disclosures

arrow right

< 2023 Market Overview Home

Performance

Where Are We Now?

It’s the age-old question: Should you be investing in the private markets in this environment? Our answer is simple. Just look at private assets’ outperformance by market cycle.

Long-Term Returns

During periods of downturn and uncertainty, it’s easy to focus on short-term actions and perspectives. It would also be the wrong approach. Let us bring you back to the longer-term outlook, where one year of investment performance looks like a mere blip on a chart.

Let us follow the road to the Emerald City, and remember to take the long view on our journey.

15-year asset class performance
annualized time-weighted return as of q3 2022

Here we have a 15-year snapshot capturing what’s arguably been a period of outstanding public equity and credit performance. Yet, private equity and credit outperformed. Handily. A 15-year snapshot, while important, only captures a single point in time, whereas the chart below looks at 10-year rolling averages.

ALL PRIVATE EQUITY 1O-YEAR ROLLING TWRS

We’ll argue this is the most relevant way to look at overall performance. You can see that there are rare instances where public markets have outperformed private markets, but they remain just that – rare. Over the vast majority of 10-year periods, private equity outperforms by meaningful margins. The noteworthy feature here is that this is all private equity. This isn’t top quartile or some curated group of funds. This is you and me investing in everything out there. No cherry picking.

And now here it is. The winner, once again, of this year’s top chart of the Market Overview. It has been the greatest chart of multiple market overviews and so should rightly be classified as the G.O.A.T.

It is the Lionel Messi of charts, the Serena Williams of data, the Michael Jordan of analysis.

BUYOUT IRR VS. PME
BY VINTAGE YEAR

Another chart that you have no doubt framed and given as a wedding or birthday present on multiple occasions; one that shows that buyout has outperformed global equities in every one of the last 22 vintage years by an average of 1,283 basis points.

We get asked, every year, whether now is the time to invest in private equity. Every year. And this chart has provided the answer for the last 22 years. Will the next 22 prove the same? No one knows for sure, but do you really want to bet against an investment that has outperformed like this in every one of the last 22 years?

We don’t. You shouldn’t either.

Let’s consider the performance evidence for private credit investments.

PRIVATE CREDIT IRR VS. PME
BY VINTAGE YEAR

Sure, it’s not 22 for 22, but 21 out of 22 is not a bad scoring average either. You know a lot of footballers who complete over 95% of their passes? Basketball players who make 21 out of 22 shots? We didn’t think so. Real estate and infrastructure have done well, but were hurt during the GFC, particularly real estate.

REAL ESTATE IRR VS. PME
BY VINTAGE YEAR

INFRASTRUCTURE IRR VS. PME
BY VINTAGE YEAR

It will be interesting to see how these strategies perform if this current downturn lasts for an extended period. Our view is that the lessons of overleverage were likely learned by most participants during the GFC; we’re not seeing those capital structures and, therefore, we’re more likely to see better returns in a difficult environment.

Definitions and Disclosures

arrow right