Performance of Buyout Funds Revisited?

This paper first shows that publicly available data on buyout fund returns are sufficient to replicate the recent findings derived from superior but proprietary datasets. The average buyout fund outperforms the S&P 500. But this study shows that buyout funds mainly invest in small and value companies. Adjusting for the size premium brings the average buyout fund return in line with small cap indices and with the oldest small-cap passive mutual fund (“DFA micro-cap”). If the benchmark is changed to small and value indices, and is levered up, the average buyout fund underperforms by -3.1% per annum