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Private equity delivered the higher median Net IRR across every 2015–2023 vintage in Dakota’s benchmarks. But the gap narrowed sharply in more recent vintages, while private credit returned capital faster.
Private equity and private credit serve different portfolio objectives. Private equity targets long-term capital appreciation. Private credit emphasizes contractual income, downside protection, and earlier distributions.
The return comparison has historically favored private equity. More recently, higher credit yields and a slower private equity exit environment have brought the two asset classes closer together.
Private equity still leads on median Net IRR
|
Vintage
|
PE Net IRR
|
PC Net IRR
|
|
2015
|
15.1%
|
7.4%
|
|
2016
|
15.6%
|
8.2%
|
|
2017
|
15.0%
|
9.0%
|
|
2018
|
14.5%
|
10.6%
|
|
2019
|
14.0%
|
10.2%
|
|
2020
|
13.7%
|
9.3%
|
|
2021
|
10.1%
|
9.9%
|
|
2022
|
12.9%
|
11.8%
|
|
2023
|
14.4%
|
10.8%
|
Source: Dakota Private Equity and Private Credit Vintage Benchmarks, 1Q26. Median Net IRR. Analysis includes vintages through 2023 only.
From 2015 through 2020, private equity’s median Net IRR averaged 14.6%, compared with 9.1% for private credit, a 5.5 percentage-point advantage. Across the 2021 through 2023 vintages, that gap narrowed to 1.7 points.
The closest comparison was 2021, when median Net IRRs were 10.1% for private equity and 9.9% for private credit. Higher base rates and floating-rate coupons supported private credit returns, while private equity faced more expensive financing and slower exits.
Broad medians can still hide meaningful differences by strategy and reporting methodologies. As discussed in Dakota's analysis on why the lack of standardized reporting makes private fund benchmarks difficult, understanding the specific metrics and peer groups is critical when evaluating specialized managers against the broader market.
Private credit returned capital sooner
Private equity also led on median TVPI, although the difference was narrow across recent vintages:
- 2021: 1.28x for private equity versus 1.22x for private credit.
- 2022: 1.23x versus 1.22x.
- 2023: 1.14x versus 1.12x.
Private credit compared more favorably on DPI, which measures capital already distributed:
- 2021: 0.35x for private credit versus 0.16x for private equity.
- 2022: 0.28x versus 0.09x.
- 2023: 0.10x versus 0.07x.
Private credit begins generating interest and principal repayments earlier, while private equity depends more heavily on realizations. For allocators managing liquidity, the timing of returns can matter as much as the headline IRR.
Which delivers better returns?
Private equity remains the higher-returning asset class based on median Net IRR and TVPI. Private credit offers more current income, faster distributions, and a return profile that has become increasingly competitive.
The choice depends on the portfolio objective. Private equity offers greater upside but carries more dispersion, illiquidity, and exit risk. Private credit offers a more contractual return profile with earlier cash flow. Used together, the two can balance long-term appreciation with income and liquidity management.
The 2021 through 2023 vintages are still developing, and much of their value remains unrealized. Their final results will depend on private equity exits, credit losses, and the durability of current marks.
Leverage Dakota Performance & Benchmarks
Broad medians are a starting point. Dakota Performance & Benchmarks lets investment teams compare Net IRR, TVPI, and DPI by strategy, vintage, geography, and fund size; build custom peer groups; and evaluate quartile placement.
See how Dakota solves private markets benchmarking to learn more about bringing clarity, structure, and standardization to private fund performance evaluation.
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