Private Equity

Question 1

What is the average nominal return excess of PE over listed or public equities in the last 25 years?

Answer 1

400-500 bps
Cambridge Associates and Benchmark Securities
MSCI World vs Global PE Index

Question 2

What about short term performance of PE?

Answer 2

On an annualized basis, PE underperformed about 1/3 of the time over the last 30 years.

Tends to occur when Public listed equities perform very strongly.

KKR

Question 3

How has PE changed over the last 4 decades?

Answer 3

1980’s were all about leverage, 1990s were all about driving multiple expansion out of assets, 2000’s were about earnings growth and in 2010’s its about been about operational improvement
BCG

Question 4

What would be the estimated sub categories of PE activity in terms of focus on value creation?

Answer 4

Leverage - now only 13%
Multiple Arbitrage 40%
Operational Improvement 48%
BCG

Question 5

Compare PE vs Stocks Annualized volatility and returns

Answer 5

PE annualized vol is only about 9% (stocks 15%) but delivers 400+ bps higher return