Private equity lags stocks for retail investors

A review of fifteen large private equity evergreen funds reveals they significantly underperformed the S&P 500 and MSCI ACWI indexes in 2025 and over a three-year period, despite charging median expense ratios of 3.76% compared to 0.03% for the Vanguard S&P 500 ETF. The report notes that the private equity industry is seeking a regulatory safe harbor from the US Department of Labor to limit lawsuits as it targets 401K retirement savings, a shift occurring as global fundraising fell 11.0% in 2025 and several US state pension funds—including those in Alaska, Texas, and Ohio—reduced their private equity allocations due to dwindling returns and liquidity risks.

• Large private equity-focused evergreen funds for retail investors significantly underperformed public stock indexes in 2025. The fifteen funds reviewed generated a median return of 11.97%, which was roughly half of the 22.34% return of the MSCI ACWI Index and lower than the S&P 500 Index's 17.43% return.
• Private equity evergreen funds maintain high costs relative to their performance. The median expense ratio for the reviewed funds is 3.76%, whereas the Vanguard S&P 500 ETF charges 0.03%. Some funds also apply sales charges up to 5%, which further reduce net returns for retail investors.
• The private equity industry is lobbying the US Department of Labor (DOL) for a legal safe harbor to protect managers from lawsuits regarding fiduciary duties to retirement savers, following a rescission of prior DOL guidance that cautioned against offering private equity in 401K plans.
• Private equity is increasingly targeting retail and 401K investors as institutional fundraising declines. Global private equity fundraising dropped 11.0% in 2025, marking the fourth consecutive year of decline and reaching the lowest level in a decade.
• Multiple US state retirement systems have reduced their private equity allocations due to poor returns and liquidity concerns. Examples include the Alaska Permanent Fund (proposed reduction from 18% to 15%), Texas Teachers Retirement System (reduced by 2 points to 12% in 2024), and the Ohio Public Employees Retirement System (trimmed by 1 point to 14%).

APA

Private Equity Stakeholder Project (2026). Private equity lags stocks for retail investors. https://pestakeholder.org/reports/private-equity-underperforms/

Chicago

Private Equity Stakeholder Project. Private equity lags stocks for retail investors. 2026. https://pestakeholder.org/reports/private-equity-underperforms/.

Wikipedia

{{cite report |author=Private Equity Stakeholder Project |title=Private equity lags stocks for retail investors |date=27 January 2026 |url=https://pestakeholder.org/reports/private-equity-underperforms/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{privateequitystakeholderproject2026private, author = {{Private Equity Stakeholder Project}}, title = {{Private equity lags stocks for retail investors}}, institution = {Private Equity Stakeholder Project}, year = {2026}, month = jan, url = {https://pestakeholder.org/reports/private-equity-underperforms/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }