Diverse and minority-owned private equity firms have produced superior investment returns over a sustained period benchmarked against the general PE industry, according to a report commissioned by the National Association of Investment Companies (NAIC).
NAIC is the industry association representing diverse and minority-owned private equity firms and firms focused on the US emerging domestic market (EDM).
The report, Recognizing The Results, was released at NAIC’s 42nd Annual Meeting & Convention in Palm Beach, Florida.
Recognizing The Results compared the audited financial returns of NAIC firms against the broader private equity market across four industry benchmarks for the period 1998 – 2011.
NAIC firms outperformed the upper quartile of the PE industry in Realizing Investment Returns (NAIC firms 20.9 per cent versus 11.8 per cent for all US PE and 14.7 per cent for buyout subset).
On a median and capital-weighted basis, NAIC firms’ internal rate of return performance was superior to the upper quartile of the PE market and buyout subset.
NAIC firms significantly outperformed the PE industry returning capital to investors (NAIC firms 160 per cent vs. 67.1 per cent for all US PE and 89.1 per cent for buyout subset).
In seven of 10 years, NAIC firms realised returns in the PE industry’s top quartile.
Connecticut State Treasurer Denise L. Nappier (pictured) says: "As principal fiduciary of Connecticut’s USD25bn pension fund, I am pleased to see that NAIC’s study of minority private equity managers clearly demonstrates the outperformance that NAIC firms have generated over their peers, and the benefits of diversification for pension funds and their beneficiaries. ‘Recognizing the Results’ is a call-to-action for institutional investors everywhere that have yet to fully embrace diversity as a factor when seeking to do business with the best in class — a perquisite to achieving a sustainable rate of return over the long haul."
