Performance Metrics
What is Public Market Equivalent (PME)?
The public market equivalent (PME) compares a private fund's cash flows to a hypothetical investment in public markets — helping LPs assess whether the illiquidity premium was worth taking.
PME analysis asks: if an LP had invested their capital calls into a public index (like the S&P 500) rather than the private fund, what would they have earned? A PME above 1.0x means the private fund outperformed the benchmark after accounting for the timing of cash flows.
PME is important because private fund IRR can be distorted by the timing of capital calls and distributions. PME provides a fairer apples-to-apples comparison against public alternatives.
Also known as: PME
Related Terms