As Figure 20 reveals, a total of 64 percent of PIAC respondents rated this barrier as important (34 percent) or very important (30 percent). Large pension funds gave it far greater emphasis (85 percent important/very important).

Several PIAC respondents confirmed that their notions of investing have been shaped by experience with well- established and proven methods for selecting and overseeing low-risk, relatively stable, liquid assets. Indeed, said some, it is liquid security performance that most determines incentive systems underlying the pension investment process (e.g., money manager compensation). Hence, there may be trouble in making the leap to securities that are, by contrast, high-risk, illiquid and occasionally unstable.

Others with stakes in private capital markets emphasized the quality of relationships between monitors (usually internal) and investment specialists (either internal or external) when determining the right variables necessary for measuring and evaluating performance. In this regard, PIAC respondents stressed the unsatisfied need for ready access to top specialists and verifiable performance-related data. Another problem identified was the incongruity of review/reporting procedures that occur over the long-term and experience in pension funds with high turnover in trustees and personnel.

One of the complexities of private capital markets, such as equity and quasi-equity, is that there is no universally- recognized standard for financial performance. As market analysts and practitioners point out, valuation is complicated by asset illiquidity and the fact that actual returns are completely determined only when these assets are successfully liquidated. Until that moment, the progress of an investment is not easily captured by a single measure or set of criteria.

In deciding to enter a market through a limited partnership or other conduit or in making judgements about potential long-term results, pension participants often rely on historical and forecasted rates of return over the lifetime of an investment or investment portfolio. Fiduciaries will receive these data in the advice of specialists. In the United States, such advice is supplemented by formalized performance calculations, such as vintage year returns data (i.e., historical earnings related to investing that occurs over parallel time periods) for private equity, provided by the analysis firm Venture Economics. There are also venture and non- venture equity indicies provided by Cambridge Associates, based on reported valuations of pools since the 1980s.^{Endnote 145}

In selected external pooling vehicles, a formal benchmark may also be established. Once capital commitments are made and investing begins, fiduciaries may also monitor progress using a benchmark, among other possible tools. Recently, one American survey tried to discover how this is done by pension funds for asset performance in various private capital markets, including equity, subordinated debt and term lending. Of course, findings reveal different techniques applied to different financial instruments. A common theme has been adaptation of familiar public bond and stock indices to private benchmarking. PERA of Colorado, for instance, measures private equity returns against a benchmark of the ten-year Standard and Poor's 500 Index plus 500 basis points, as does CalPERS in combination with other tools.^{Endnote 146} CLMPC interviews with pension managers found this approach is similarly applied by several funds in Canada.^{Endnote 147}

Several PIAC members flagged an interest in developing more precise benchmarking and performance measurement methods for use in Canadian private capital markets, including adaptations of public indices (e.g., the TSE 300). It was also observed that lessons might be learned from conventional methods in other business and financial sectors, such as corporate profit projections and standards applied in banking and insurance (e.g., for debt instruments). Most acknowledged that this is a challenging and highly technical field requiring careful attention to different asset classes and sub-classes.