Global private equity index returns 20 per cent, says Cambridge Associates
The Cambridge Associates Global ex-US Developed Markets Private Equity Index returned 20.4 per cent for the year ending 30 June 2018.
Over the same period, the equivalent index for listed companies, the MSCI EAFE Index, returned just 6.9 per cent. The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across developed markets in Europe, Australasia, and the Far East.
Cambridge Associates says the strong performance of private equity funds is based on their successful allocation of capital to technology investments, which delivered the highest returns of all sectors in the first half of 2018.
Meanwhile, private equity funds have invested less in financial services businesses, a sector which has delivered low returns in comparison to the rest of the market and technology in particular.
Technology represents 21.5 per cent of the Cambridge Associates Global ex-US Developed Markets Private Equity Index but only 6.8 per cent of the MSCI EAFE index. Financials, the worst performing sector, represent 7.4 per cent of this Private Equity Index but are a larger component of stock markets, at 19.8 per cent of the MSCI EAFE index.
The Cambridge Associates Global ex-US Emerging Markets Private Equity Index returned 17.2 per cent over the last year. This Index outperformed its equivalent for listed companies, the MSCI Emerging Markets Index, which returned 8.4 per cent over the same period.
Technology investments represent 30.6 per cent of the Global ex-US Emerging Markets Private Equity Index and delivered returns of 21.3 per cent over the first half of 2018, the highest of all sectors.
Nicolas Schellenberg, Head of EMEA PE & VC Research at Cambridge Associates, says: “Private equity funds have made a calculated bet on overweighting technology which has paid off. That overweighting in technology is a large component of the outperformance of listed company indexes.”
“That outperformance is not the result of luck or chance. However, private equity is a lagging asset class, so the recent dip in technology valuations seen in the public markets is yet to be reflected in valuations.”
The Cambridge Associates US Private Equity Index returned 20.4 per cent for the year ending 30 June 2018, beating its equivalent index for listed companies the Russell 2000 (17.6 per cent) and equalling the ex-US Developed Markets Private Equity Index (20.4 per cent).
Cambridge Associates says the performance of technology investments was also a key driver of the returns generated by US private equity funds. Technology represents 30.1 per cent of the US Private Equity Index US compared to 21.5 per cent for the ex-US Developed Markets Private Equity Index