Non-US developed private funds beat public benchmark

Strong performance by privately held Dutch portfolio companies helped Cambridge Associates’ PE and VC index outperform listed comparables by 11ppt.

Private equity and venture capital funds in developed markets excluding the US returned 11.7 percent last year, compared with an almost flat return by comparable public markets, according to Cambridge Associates.

Strong performance by Dutch portfolio companies helped drive Cambridge’s LLC Global ex US Developed Markets PE/VC Index, which tracks the performance of 863 private funds. UK portfolio companies were the weakest performers, returning -2.7 percent for the year.

By comparison, the MSCI EAFE public benchmark, which tracks large and mid-cap securities across 21 developed markets including countries in Europe, Australasia and the Far East, excluding the US and Canada, delivered a 0.9 percent return.

This outperformance trend bears out over a 3-, 5-, 10-, 15-, 20- and 25-year period, though the 10.8 percentage point spread between the private and public benchmarks seen over the past year is the largest yet.

In terms of sector, materials companies were the strongest performers in the index, generating an annual return of 22.3 percent. Consumer discretionary, financials, healthcare, industrials and IT, which each account for more than 5 percent of the index, also delivered positive returns.

The research firm’s Emerging Markets PE/VC Index, which tracks the performance of 627 private equity and venture capital funds, generated a return of 4.6 percent last year, below the public MSCI Emerging Markets Index return of 11.4 percent.

This is the first year in which emerging public markets outperformed their private counterparts, according to Cambridge Associates data.

Chinese companies, which made up 46.1 percent of the emerging market index as of the end of last year, returned just 2.8 percent. Companies based in India, which comprise 8.3 percent of the index, returned 11.6 percent over the course of the year.

The strongest full-year returns in emerging markets came from companies in the consumer staples sector, which gained 15.1 percent.

“Chinese firms continue to represent almost half of the Emerging Markets Index, though South Korean firms comprise a growing percentage of the index. And companies based in India generated notably strong returns that year,” said Vish Ramaswami, managing director at Cambridge Associates.