The private equity industry can rightly claim to have earned attractive long-term returns in the past, relatively independent of capital market fluctuations. Can we expect this to continue in the future, given what is happening on all financial markets at the moment?

In the area of classic forms of investment such as government bonds, the picture is very clear for investors today. In Europe at least, we now have the phenomenon of "yield-free risk" in all low-risk asset classes. Anyone who invests capital at low risk and without extremely long maturities will no longer get a nominal return worth mentioning anywhere in return. In any case, no one is talking about a real return on investment anymore. In some cases, even the nominal pre-tax yield has been negative, as in the case of some short-dated first-class government bonds, although initial doubts have even been raised about their supposed risk-free nature. An attractive environment for capital looks different.

For riskier liquid investments such as equities and for riskier illiquid investments such as private equity, the picture is less clear to date. This is due to the fact that financial science defines risk as susceptibility to fluctuation over time, and before a certain period of time has elapsed, it is therefore not possible to make any meaningful statement about the relationship between risk and return on the basis of historical data. The brave new world of "yield-free risk" is still too young to truly assess the long-term performance of riskier assets in this environment. It is unclear whether a positive real return in these markets is anything more than a bubble, as it might be triggered by prevailing mini-interest rates.

In the case of private equity investments, there is also the fact that any valuation or performance figure prior to the occurrence of a "liquidity event" or "exit" is highly questionable. These are illiquid investments. Ultimately, however, only the "cash on cash" realized profit counts, not the theoretically derived valuation, on which, after all, no transaction is possible for the investor. However, the profits realized today are all from a different time, when all capital market data looked quite different. Thus, we have no hard data with which to answer our initial question.