Abstract This paper explores the returns of private funds and the returns of the S&P 500, to ascertain which returns are more favorable for investors for investing. The study will make use of quantitative research methodology in the collection of the required data for use in making comprehensive conclusions on which returns are better. For this reason, a survey would be appropriate in carrying out the research and collecting the required information. Empirical findings have shown that returns from private funds have some edge over the returns of the S&P 500. Despite this, researches in this area are limited, and thus there is a need for more comprehensive research to bring out the varied differences between returns of private funds and returns of the S&P 500. Introduction There are several factors that investors have to consider before making any investment decisions. One of these factors is the number of returns to expect from the projected investment capital. As such, it becomes highly important to evaluate investment options that have a high rate of return on invested capital. According to a study carried out by Redhead (2008), investors can consider the profitability of index funds against private equity funds in terms of the returns. However, most investors are likely to make poor investment decisions in cases whereby they lack the necessary information about various investment opportunities. Over the past decades, a lot of concerns have been raised over the behavior of stock prices, private equity funds and the Standard and Poor’s 500 stock index often abbreviated as S&P 500. There has been a common belief that firms listed in the Standard and Poor’s 500 price index benefit from an increase in stock price that is permanent implying that they enjoy a permanent rise in returns on invested capital. Nevertheless, recent studies show that there is a significant relationship between the event window and the size of price reversal, whereby a longer event window results in a larger price reversal (Jones 2009). Evidently, the returns for the S&P 500 are not permanent due to the interplay of financial factors and changes in market conditions. On the other hand, private funds have become popular in financial and economics literature. Private equity funds have grown significantly over recent years. For example, there was an increase in private equity funds in the US from $5 billion to $300 billion between 1980 and 2004. Even though private equity funds are considered a good example of major classes of financial assets, there is limited literature on how such funds perform in terms of returns. This paper provides a research proposal for the study analyzing the returns of private equity funds and S&P 500, in an attempt to compare the two types of funds in terms of their returns. Information on the private equity efficacy of private equity acquisition assets criticizes equity and decisively affects how ROI is measured. The private equity business has long depended on the interior rate of return (IRR) as its principal private equity efficacy extent, but that metric has been extensively condemned — not just in the theoretical investment community but among organization consulting companies