Study: PE trumps public markets outside the US

Private equity and venture capital investments outside the US during the first quarter of the year outperformed their public market counterparts, according to new research from consultant Cambridge Associates.

The research “confirms the merits of the private equity industry performance compared to public markets, pretty much across the board,” senior consultant at Ralph Jaeger told Private Equity International. “I think we’re seeing the effects of the [portfolio company] cost reductions that have taken place in non-US developed markets across a large area of segments,” Jaeger said, “coupled with the significant pickup in revenues we’ve observed.”

Both Cambridge’s Global (ex-US) Developed Markets Private Equity and Venture Capital Index and its emerging markets index outperformed the corresponding Morgan Stanley indices for Q1 2011. Cambridge’s non-US developed markets index rose 5.9 percent during the first quarter of the year, beating the 3.4 percent rise recorded by the MSCI for non-US developed markets, while Cambridge’s emerging markets index increased 3.3 percent, outpacing the MSCI emerging markets increase of 2.1 percent.

The index performance figures for non-US developed markets and emerging markets, however, were less than the Q4 2010 data, which came in at 9.5 percent and 11.6 percent respectively.

Non-US developed markets outperformed emerging markets in Q1 2011 for only the fourth time since the first quarter of 2007. Emerging market performance continues to exceed that of non-US developed markets, however, in the one-, three- and five-year time periods.

The study marks the first time Cambridge has made its data on global private equity and venture capital investments available to the public.

“The data is quite representative given the sample that it comprises,” Jaeger said. “We strive to continue to make such data available to the broader public because we believe information and transparency on performance benefits GPs as much as LPs.”

The developed markets index includes private equity and venture capital funds focusing on Australia, Canada, Israel, Japan, New Zealand, and Western Europe. The emerging markets index includes private equity and venture capital funds investing primarily in Africa, emerging Asia, emerging Europe, Latin America, and the Middle East, excluding Israel.

Cambridge’s database of developed non-US and emerging markets private equity and venture capital funds is comprised of 597 funds formed from 1986 to 2010.