Swiss listed-private equity research and indices publisher LPX has launched a UK index including 22 investment vehicles with a combined market capitalisation of €15 billion ($21 billion).
The index contains London Stock Exchange and AIM-listed vehicles which invest a minimum of 50 percent in the asset class. The vehicles must meet certain liquidity criteria and have a minimum market capitalisation of €20 million.
Firms listed on the index include 3i, Intermediate Capital Group and SVG Capital. The 22 firms’ data has been back tested to 31 December 1998. The return on the index from this date is 12.7 percent per annum with an annualised volatility of 15.5 percent and has a Sharpe Ratio, a measure of the mean return per unit of risk in an investment asset or a trading strategy, of 0.62.
LPX managing director Michel Degosciu said: “This will put pressure on the private equity firms that are not listed to be more transparent because these companies provide the same return to investors while providing more information to investors.”
In May of this year data provider Private Equity Intelligence published a study with LPX. The study compared the index of the 50 largest liquid listed private equity companies worldwide LPX 50 against Preqin’s All Private Equity Money Weighted IRR and showed roughly comparable returns between the two asset classes.
Degosciu said: “The top quartile of private equity funds outperformed the listed index. However, listed private equity outperforms other private equity firms.” A large institutional company with access to top quartile funds may choose to invest in these private funds, but the ordinary investor with €30,000 will be better off committing to transparent listed-private equity, he said.
LPX tracks and benchmarks more than 250 listed private equity vehicles worldwide. It has been publishing private equity indices since 2004.
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