Based on the following charts, you can see that the private markets have outperformed on an absolute and risk-adjusted basis in the long-term (even after de-smoothing volatility).

Footnote: ¹Green means the private markets have outperformed the public benchmark by the requisite 300+ basis points that most investors look for in their private portfolios. Yellow means there is outperformance, but it is less than 300 basis points. Red means the public markets outperformed.

Footnotes:
Chart 4: Indices used: Hamilton Lane All Private markets with volatility de-smoothed; Hamilton Lane All Private Equity ex. Credit and Real Assets with volatility de-smoothed; S&P 500 Index; Russell 3000 Index; MSCI World Index; HFRI Composite Index; Hamilton Lane Private Credit with volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton Lane Private Infrastructure with volatility de-smoothed; FTSE/NAREIT Equity REIT Index; S&P Global Infrastructure Index; MSCI World Energy Sector Index. Geometric means returns in USD. Assumes risk free rate of 2.2% representing the average yield of the ten-year treasury over the last ten years.

Chart 5: Indices used: Hamilton Lane All Private Markets with volatility de-smoothed; Hamilton Lane All Private Equity ex. Credit and Real Assets with volatility de-smoothed; S&P 500 Index: Russell 3000 Index: MSCI World Index: HFRI Composite Index; Hamilton Lane Private Credit with volatility de-smoothed; Credit Suisse High Yield Index; Barclays Aggregate Bond Index; Hamilton Lane Private Real Estate with volatility de-smoothed; Hamilton Lane Private Infrastructure with volatility de-smoothed; Hamilton Lane Natural Resources with volatility de-smoothed; FTSE/NAREIT Equity REIT Index; S&P Global Infrastructure Index; MSCI World Energy Sector Index. Geometric means returns in USD. Assumes risk free rate of 2.0% representing the average yield of the ten-year treasury over the last ten years.

 Chart 5: Bubbles sized by relative market NAV as of 9/30/20.

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Definitions: 

All Private Markets: Hamilton Lane’s definition of “All Private Markets” includes all private commingled funds excluding fund-of-funds, and secondary fund-of-funds. 

Credit: This strategy focuses on providing debt capital. 

Real Assets: Real Assets includes any PM fund with a strategy of Infrastructure, Natural Resources, or Real Estate. 

Real Estate: Any closed-end fund that primarily invests in non-core real estate, excluding separate accounts and joint ventures. 

Infrastructure: An investment strategy that invests in physical systems involved in the distribution of people, goods and resources. 

Natural Resources: An investment strategy that invests in companies involved in the extraction, refinement or distribution of natural resources. 

The S&P 500 Index tracks 500 largest companies based on market capitalization of companies listed on NYSE or NASDAQ. 

The Russell 3000 Index is composed of 3000 large U.S. companies as determined by market capitalization. 

The MSCI World Index tracks large and mid-cap equity performance in developed market countries. 

The HFRI Composite Index reflects hedge fund industry performance. 

The Credit Suisse High Yield Index tracks the performance of U.S. sub-investment grade bonds. 

The Barclays Aggregate Bond Index tracks the performance of U.S. fixed rate corporate debt rated as investment grade. 

The FTSE/NAREIT All Equity REIT Index tracks the performance of U.S. equity REITs. 

The S&P Global Infrastructure Index tracks the performance of 75 companies from around the world that represent the infrastructure industry. 

The MSCI World Energy Sector Index measures the performance of securities classified in the GICS Energy Sector. 

Desmoothing: A mathematical process to remove serial autocorrelation in the return stream of assets that experience infrequent appraisal pricing, such as private equity. Desmoothed returns may more accurately capture volatility than reported returns. The formula used here for desmoothing is: 

rD(t) = (r(t) – r(t-1)*p)/(1-p) 

Where rD(t) = the desmoothed return for period t, r(t) = the return for period t, p = the autocorrelation.

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