Private Equity Index: All You Need to Know

Hello You, it seems you’re interested in the private market. Then you should know about the private market index as well, if not then don’t worry. At the end of this article, you’ll have complete information about 

1. What is a Private Market Index

2. Top Private Market Indexes You Need to Know

3. Why the Private Market Index is a Game-Changer

4. My Take on the Private Market Index

   
   
   
   

What is a Private Market Index

I am sure you have heard about public indexes or stock market indexes. In India, we have BankNifty, Nifty50, and more. In the USA, we have the S&P 500, NASDAQ-100, and the list goes on. All these indexes are regulated by government bodies or special laws. Due to this regulation, we trust this Index. 

Why is there a need for a private market index and how can this index help you?

In recent years, the private equity market has grown exponentially. According to the statista.com Private Equity report, the global market is projected to reach US$1.15 trillion in 2025. The EY Private Equity Pulse report also states that the private market's value increased 36% in 2024. This means the number of startups getting venture capital or private equity funding has increased in recent years, making it tough for small private equity investors to track all the companies. 

This kind of Index not only helps private equity investors but also gives free marketing and a platform where companies can get noticed by a larger audience and this can help to generate more revenue. On the other hand, a general audience like me and maybe you get to know more about private market companies, trends, the latest technology and innovation, and some inside gossip about private markets to flex in front of friends 😁. 

We can use the private market index in the following ways:

• Identifying Market Trends

• Identifying Emerging Sectors

• Competitor Analysis

• Comparative data to measure private equity returns.

• Improving risk management with more accurate, real-time insights. 

• Better Investment strategy development. 

It's important to note that the private equity market is not regulated by any government. Relying on random websites is not beneficial. Websites such as CrunchBase, PitchBook a Morningstar Company, S&P, MSCI, and FactSet are some of the trustworthy sources for private equity data. 

Top Private Market Indices You Need to Know

We’re going to understand, different kinds of private equity indexes and some of the famous indexes right now.

1) Fund-Level Indices

These indices aggregate performance data from private equity funds, providing insights into how funds perform over time. 

Example:

MSCI’s Burgiss Private Capital Index: Built using cash flow data from institutional investors, this index measures net-to-investor performance.

2) Deal-Level Indices

Deal-level indices focus on how funding companies have raised rather than aggregate fund performance. One of the most famous indexes in this category is the Unicorn Index.

Example:

• Preqin Private Capital Index: Uses deal-specific data to monitor market trends, sectoral performance, and investor returns.

• PitchBook Private Equity Index: Tracks deal-level metrics, including valuations, entry/exit multiples, and deal sizes. 

• Morningstar PitchBook Global Unicorn Index: Shows Unicorn companies that have been valued at over $1 billion.

3) Public Market Equivalent (PME) Indices

These indices compare private equity performance to public markets, helping to understand relative performance. 

Example:

MSCI Private Equity Index: Provides a benchmark for private equity investments relative to public equity markets.

4) Sector Specific Indices

As the name goes focus on performance within specific industries or geographies. There are several sector-specific indices hence not listing down examples. 

5) Customized Benchmark Indices

Designed by firms or investors to meet specific needs, combining public and private data. 

6) Broad Market Indices

These indices measure the overall performance of the private equity market. 

These are some of the private market indices but the list is not limited to this there are some others as well such as PitchBook VC-Backed IPO Index, PitchBook PE-Backed IPO Index, and more. 

Why the Private Market Index is a Game-Changer

It is a game changer because it provides clarity, benchmarks, and insights into the traditional world of private equity. Here are some of the reasons:

• Enhanced Transparency

• Reliable Benchmarks

• Data-Driven Decision Making

• Improved Risk Management

• Identifying Opportunities

• Standardization in a Fragmented Market

Keep this section short because everything has already been covered in the What is a Private Market Index section of this article.

My Take on the Private Market Index

I believe the Private Market Index is essential for greater transparency in the private market. It offers a broader audience valuable insights into the latest innovations and trends in the industry. 

On the other hand, I believe this kind of index is beneficial for small private investors, private equity professionals, and the general public. Because larger funds, venture capital, and private equity already monitor such companies for their potential to deliver high multiples.

Moreover, the index supports companies in several ways:

• Building Trust: Enhances credibility among investors, customers, and dealers.

• Marketing Benefits: Provides free exposure, boosting visibility in the market.

• Revenue Opportunities: Opens doors to higher revenue generation by leveraging the recognition gained through the index

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