Private equity
| Real return | Long term average about 6% +- 3%, short term (earnings yield) +- 4% |
| Volatility | 25% +- 10% |
| Correlation | 0.6-1.5 to public equity |
| Testfolio | - |
| Inflation | Real, but interest rate sensitive |
Private equity is an expensive to access form of equity investment. It tends to invest in smaller companies. The prices are marked infrequently, subjectively. and often delayed. This tends to understate volatility and correlation.
The best way to model private equity seems to be a a levered small-cap fund. Although some claim strong outperformance, the data is not very clear and quite opaque.