Performance
Public Market Equivalent (PME)
An analytical method that tests whether a private fund's cash flows would have outperformed the same cash flows invested in a public market index.
The most common variants are Kaplan-Schoar PME (a wealth multiple) and Long-Nickels or Direct Alpha (an IRR-equivalent). All map fund contributions and distributions onto a chosen public index to compute the index-equivalent return.
PME is the cleanest test of whether the private market premium is real for a given fund. A fund with a 15% IRR sounds impressive until a PME shows the S&P 500 would have returned 14% on the same cash flow profile.
The index choice matters. Buyout funds are typically benchmarked against a small/mid-cap or sector index, not the broad market.