As the UK government pushes individual investors towards private market investing, the success of private equity investment trusts varies. UK-focused trusts outperform global ones, but most global strategies underperform public markets over 10 years. Morningstar’s Dan Kemp notes the illiquidity premium in private markets isn’t guaranteed or constant.

Private equity trusts offer access to private assets not easily available to individual investors. They trade on the London Stock Exchange, holding unlisted or early-stage companies. UK-listed private equity trusts hold about £45 billion in total assets, owned mainly by institutional investors. Only 9% of ownership comes from individual investors.

Private equity investment trusts have a wide range of underlying holdings, from fund of funds strategies to direct investments in unlisted companies. Some focus on specific sectors or themes, making them difficult to benchmark. The range of holdings and strategies makes it challenging for investors to compare performance within the group, according to Morningstar’s Daniel Haydon.

Private equity trusts have shown mixed long-term returns, with the best performers growing investments by double-digit percentages over 10 years. However, returns are widely dispersed, reflecting both fund success and different strategies. Comparing returns with global equity trusts suggests investors could have achieved high returns from listed stocks at lower costs.

Drawdowns and volatility of private equity trusts vary, with some seeing lower drawdowns than global markets over five years. The dispersion in drawdowns highlights the differences between individual investment trusts. Correlation with public markets is moderate, showing lower correlation with stocks and bonds than those markets have with each other.

Private equity trusts have shown stronger performance over 20 years, with returns ahead of global market indexes. However, there is a wide range in performance, with some funds underperforming their benchmarks. Private equity trusts have varying correlations with public markets and their benchmarks, influenced by factors like interest rates and the business cycle.

Read more at Morningstar: Have Private Equity Investment Trusts Paid Off For Investors?