Calculator: can private equity beat an ETF
Work out the gross return a private equity fund must reach, after annual fees and performance fee, just to match a simple index ETF.
Why this is the right question
Private equity brochures almost always compare a gross performance to an index. That is the most flattering comparison available, and the least useful: what reaches you is performance after annual fees and after the performance fee.
This calculator reverses the reasoning. Instead of asking you to believe an advertised return, it works out the gross return the fund must actually reach for you to end up level with an index ETF bought the same day and left alone.
How to read the result
The percentage shown is a break-even threshold, not a forecast. Below it, you would have been better off with the ETF. Above it, the fund creates value for you, and not only for its manager.
The gap in points is the most telling figure: it measures the gross outperformance the manager has to produce, year after year, purely to offset their own fee structure.
What the calculation includes
| Item | Treatment |
|---|---|
| Fund annual fees | Deducted from the gross return every year |
| Performance fee | Charged on the gain above the hurdle rate |
| Comparison ETF fees | Deducted every year as well |
| Duration | Identical for both, with no early exit |
What it leaves out
Illiquidity, which has no advertised price but a real cost: for eight to ten years, that money cannot fund anything else. Staggered capital calls, which shift the real outlay. And the dispersion of outcomes, far wider in private markets than in index funds: the average of an asset class says nothing about the particular fund being offered to you.
This calculator is for information only. It uses simplified assumptions, ignores your personal situation and does not constitute investment advice.