While public markets have largely become a source of beta, dispersion among managers in the private markets remain wide.
Public Markets Are a Source of Beta
Public markets have increasingly come to function as sources of beta rather than arenas where managers can consistently add value through active management. Over long horizons, most active equity managers have failed to outperform broad market benchmarks, with 91% of public equity managers underperforming the S&P 500 over the past 20 years.
At the same time, the share of assets managed passively has surged as investors embrace low-cost, index-tracking strategies. Passive funds now represent almost 40% of all managed funds, reflecting a dramatic shift of capital toward strategies that deliver market beta rather than trying (and often failing) to beat it.
Sources: Left: S&P Global as of June 30, 2025 (latest available). Right: Bloomberg, S&P LCD and Apollo Chief Economist as of September 30, 2025. Includes both equity and fixed income index funds.
Private Market Alpha Exists (But Is Not Evenly Captured)
As we recently discussed, incorporating private markets into a traditional 60/40 portfolio of public stocks and bonds has historically enhanced returns while reducing overall risk. That said, performance dispersion in private markets is meaningfully wider than in public markets. As the chart below illustrates, private markets have delivered higher median returns than their public counterparts, but with significantly greater variability across managers. In private equity, the return gap between top- and bottom-decile managers is almost 30%, compared with just 2% in public equities. A similar pattern holds in credit, where private debt shows a 13% spread versus roughly 1% in public fixed income.
This dispersion has implications beyond headline returns. Distributions — an increasingly important focus for private market investors in today’s environment — also vary materially by manager. PitchBook data shows that portfolio companies acquired at higher entry multiples have taken substantially longer to exit than those purchased at lower valuations, a dynamic that has become even more pronounced in recent vintages.
Historically Higher Returns, Wider Outcomes
For illustrative purposes only. Subject to change at any time without notice. Past performance is not indicative of nor a guarantee of future results. Public equity data is from Morningstar US large blend and public fixed income data is from Morningstar US fund intermediate core bond 20-year return dispersion data through December 2025. All other asset classes are sourced from the PitchBook database of funds across vintage years 2005–2019 as of March 2025 (20-year IRR). The primary metric is IRR; private debt includes CLOs, direct lending, special situations, distressed, mezzanine, bridge financing, RE debt, infrastructure debt, venture debt; private equity includes buyout, growth/expansion, diversified private equity, turnaround; real assets include real estate and infrastructure, real estate includes core, core plus, value added, opportunistic and distressed; venture capital includes angel fund, early stage, later stage; secondaries include all asset classes; private capital includes private equity, VC, real estate, infrastructure, private debt, secondaries.
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