Diverse asset managers continue to beat benchmarks, says NAIC performance study
Diverse-owned private equity firms continue to outperform their benchmarks, according to Examining the Returns 2019: The Financial Returns of Diverse Private Equity Firms, a new study released by the National Association of Investment Companies (NAIC).
Despite delivering consistent returns, diverse- and women-owned firms collectively manage only 1.3 per cent of the investment industry's $69 trillion in assets under management.
Authored by Meredith Jones, Partner, Head of Emerging Manager Research for Aon Hewitt Investment Consulting, a leading global professional services firm, and compiled with assistance from KPMG to ensure objectivity and the confidentiality of all individual firm data, the report's findings are a testament to the skill of diverse managers in sourcing deals and executing their investment strategies. This report is the industry's only quantitative study measuring the performance of diverse-owned private equity firms.
Examining the Returns 2019 updates and confirms the outcomes of its predecessor report conducted in 2017 detailing outperformance by diverse-owned firms. Among the 2019 report's key findings are:
• Diverse private equity funds outperformed the Burgiss Median Quartile in 78.57 per cent of the vintage years studied.
• NAIC member firms produced higher Distributed to Paid-In (DPI) 64.29 per cent of the time since 2000, and diverse private equity funds outperformed in roughly 56.3 per cent of all vintage years available.
• Roughly 54 per cent of the diverse private equity funds reporting appeared in the top quartile based on multiple on investment capital (MOIC) for the full period, while approximately 57 per cent of the funds in the 2011-2018 period produced top quartile performance.
"This often-overlooked segment of private equity has a strong, proven history of surpassing the industry benchmarks," says Robert L Greene, President & CEO of NAIC. "We hope that studies such as this will continue to shine a spotlight on the talent in the diverse investment manager marketplace and that institutional investors will take measurable steps to enhance allocations to these firms in order to better meet their actuarial commitments to their retirees."