Private Equity Illiquidity Premium Calculator for LPs
Test whether your expected private equity return beats the return you need to accept assets that are hard to sell.
- If private equity offers an expected 14% return and we need 10%, how much extra return do we expect?
- How large is that expected return premium as a share of our 10% target?
- If our expected return falls to 11%, how much extra return is left?
Return hurdle at a glance
Estimate based on the inputs shown.
The return you expect is above the return you need.
How it is calculated
Return premium = expected private-markets return − required return
The gap between return rates is shown in percentage points. The returns you expect are not promised.
Read the result in context
An LP may want extra return for holding private equity that is hard to sell. This tool compares your expected return with the hurdle you choose. It does not assume private assets will earn extra return.
What is an illiquidity premium?
It is the extra return an investor may expect to need for holding an asset that is hard to sell.
What is the relative premium?
Divide the gap in percentage points by the benchmark rate, ignoring its sign. This gives the relative premium.
Is the expected return a forecast?
No. It is the assumption you enter to test against your return hurdle.