Every so often, a new investment trend captures the spotlight, and over the last decade, it’s been private equity and other alternative assets. The story is compelling: access to exclusive deals, institutional-grade strategies, and returns that supposedly leave traditional investing in the dust.
It all sounds impressive, making it easy to feel that if you’re not part of it, you might be missing out. But at Endeavour Wealth Management, we’ve learned that behind the marketing, the data tells a very different story.
On paper, private equity funds look like strong performers. They often report smoother results and higher returns than public markets. But that’s largely because of how their results are measured and what they’re compared to.
One of the reasons for the mirage is that private funds don’t trade daily like public stocks. Their values are based on manager estimates and are reported much less frequently. This makes the ride appear smoother, less volatile, and more stable. But it’s largely an illusion.
According to Dimensional Fund Advisors’ 2024 paper, Understanding Private Fund Performance, when researchers adjust for this “smoothing,” private equity returns move much more like public markets.
Many private equity performance charts show results against the S&P 500. At first glance, that makes private equity look like a clear winner. But it’s not a fair comparison. The S&P 500 represents large, mature companies that carry far less risk. With less risk, investors should expect lower returns. Private equity, on the other hand, invests in smaller, less liquid companies that naturally come with more uncertainty and volatility. Investors who allocate capital to higher-risk investments should earn higher returns when things work out. But remember, higher risk doesn’t guarantee higher returns, it guarantees a greater range of outcomes, both good and bad.
When researchers use more appropriate benchmarks, private equity’s apparent edge disappears. The higher returns largely reflect taking more risk, not delivering better risk-adjusted performance.
In other words, much of private equity’s allure comes from how it’s presented, not from superior long-term results.
Even if you believe in the potential of private equity, success depends heavily on choosing the right manager, and that’s no small task.
The gap between the top-performing and bottom-performing private funds is massive. Some generate impressive gains, but many underperform low-cost public market investments once fees and illiquidity are considered.
Morningstar’s 2024 report highlighted that 75% of alternative mutual funds have closed over time. That statistic alone is a reminder that complexity often works better in theory than in practice.
Private equity funds are often expensive, illiquid, and difficult to evaluate. They can lock up your capital for years and rely on a single manager’s skill. In contrast, public markets allow investors to “own the market,” spreading risk across thousands of companies worldwide, with daily liquidity and transparent pricing.
A globally diversified portfolio of low-cost funds gives you broad exposure, steady growth potential, and the flexibility to adapt as life changes. You don’t need a complex structure or secret strategy to succeed. You just need a plan rooted in timeless principles. Because real wealth isn’t built on chasing what’s new or exclusive. It’s built on consistency, patience, and trust in a process that works.
At Endeavour Wealth Management, we believe the best investment strategies are often the simplest ones. That doesn’t mean they’re easy. It means they’re clear and based on evidence rather than excitement. The hard part is the human side of things. Simple strategies work, but investors are often impatient and want results immediately, causing them to abandon good strategies far too soon.
Endeavour Wealth Management was founded on one simple idea:that great financial advice should make your life easier.
We don’t chase fads or follow short-term market noise.Instead, we build portfolios designed to endure. Portfolio focused on long-termresults, aligned with your goals, and supported by decades of financialresearch.
Private equity might sound sophisticated, but truesophistication lies in knowing what actually matters and having the disciplineto stick with it.
At Endeavour Wealth Management, our mission is to help clients simplify their financial lives and achieve their goals with confidence. If you’d like to learn more about how our evidence-based investment philosophy can work for you, we’d be happy to start a conversation.
Sources:
Dimensional Fund Advisors. Understanding Private Fund Performance, 2024.
Morningstar. 75% of Alternative Mutual Funds Have Died — There Are Lessons for Would-Be Private Market Investors, 2024.
This information has been prepared by Brandt Butt who is an Investment Advisor and Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor and Portfolio Manager can open accounts only in the provinces in which they are registered.
iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. iA Private Wealth is a trademark and a business name under which iA Private Wealth Inc. operates.
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