Investors increasingly seem to be drawn to private equity investments (PE) which offer the promise of enhanced returns relative to the public market. I have repeatedly argued that the US public stock market is the best “money-making machine” in the world. Since 2009, the S&P 500 has generated an above-norm annualized return of 12.1%.
Here are 5 reasons why I believe the stock market is still the best place to be:
- Only 6% of all some 2,000 actively managed funds have managed to beat the S&P 500 return over the past 20 years through 2024 according to S&P Global research. Do private fund managers really have greater ability than those managing public funds?
- PE firms charge hefty fees-typically 2% annually combined with an incentive fee of 20%. In order to generate returns higher than the S&P 500, PE firms need to generate annualized returns of 15-16% before fees to stay even with the S&P 500.
- PE assets have grown dramatically over the years. Private Equity Wire estimates growth of 4.5x since 2010 reaching assets of $3.77 trillion in 2023. As of mid-2025, it was reported that uninvested PE capital ranged from $1 trillion to $1.2 trillion. Meanwhile, PE investors are paying a 1.5%-2% management fee on uninvested cash assets. With more than 25% of PE assets held in cash, it becomes virtually impossible to perform as well as the S&P 500.
- PE assets are priced quarterly by internal teams, in some cases, which can lead to “pie in the sky” portfolio valuations. Here’s a recent example. Bluerock Total Income +Real Estate Fund went from being private to listing on the NYSE. With a stated net asset value of $24.36 a share, the fund on its first trading day closed at $14.70 a share, 40% below the “pie in the sky” valuation reported by the company to investors.
- Investors holding public securities are provided with daily valuations and immediate access to their assets. PE lock-up periods have ranged 3-5 years in the past. They have now grown to 6.8 years according to Value Driven Solutions due to difficulty in bringing private companies public. In addition, PE firms in some cases are unable to honor redemptions which means exiting before the end of the lock-up period. Thus, investors may have to wait a lot longer to get their money back.
There seem to be many potholes along the road to investing in private equities. For investors, the public market offers many advantages: being able to review your portfolio every day where the price of every security is never in doubt and having immediate access to your money.
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Robert Zuccaro, CFA is the Founder & Chief Investment Officer at Golden Eagle Strategies. Robert has over four decades of experience in equity research and fund management, having led institutional portfolios through multiple market cycles. He’s been recognized by national financial publications for his work in quantitative investing.
Email:info@goldeneaglestrategies.com / phone: (561) 510-6606
