Over a 27-year period ending in Q3 2024, Cliffwater found that U.S. buyouts (private equity) consistently traded at a 29% EBITDA multiple discount relative to public equities, contributing significantly to private equity’s historical outperformance. This discount, combined with higher earnings yields and potential valuation convergence, helped private equity deliver a 6% gross return premium, which nets to about 2.2% after fees compared to public markets. 

Several structural tailwinds reinforce private equity’s appeal, including a shrinking pool of public companies, persistently low credit spreads, and extreme valuation gaps between large-growth and small-value stocks. 

These valuation disparities, combined with the relative strength of the U.S. dollar, give large-cap firms and private equity buyers strategic advantages in acquiring smaller domestic and foreign targets. Meanwhile, the sluggish IPO and M&A markets in 2025 have led to a spike in discounted private equity secondary sales, offering further entry points for opportunistic investors. 

Finsum: Despite recent macro headwinds, these intersecting forces create a compelling backdrop for private equity to continue outperforming.