Is U.S. Small Cap a Viable Alternative to U.S. Private Equity?

A number of academic papers have indicated that returns for private equity funds, on average, have not outperformed public equities in the United States. This contradicts the risk premium one might expect with private equity, given the liquidity, transparency limitations, and additional origination costs associated with private equity investments. In this paper, Brandes Institute Advisory Board member Bruce Grantier examines the academic research and historical performance (both on an asset class and manager value-added basis) to evaluate small cap as an alternative investment to private equity.