Funds providing private investment capital to companies located largely outside the US earned solid returns during the second quarter, aided by a weakened US dollar that helped to boost foreign currency returns, according to a commentary published by Cambridge Associates.
For the second quarter in a row, private equity and venture capital investments in non-US developed markets bested the performance of similar investments in emerging markets. As in the prior period, both asset classes generated better returns than their public market counterparts.
Cambridge Associates LLC Global ex US Developed Markets Private Equity and Venture Capital Index includes private equity and venture capital funds that focus on Australia, Canada, Israel, Japan, New Zealand, and Western Europe. Cambridge Associates Emerging Markets Private Equity and Venture Capital Index includes private equity and venture capital funds that invest primarily in Africa, emerging Asia, emerging Europe, Latin America, and the Middle East ex Israel.
The developed markets index increased 6.7% return during the quarter ending June 30, 2011, more than doubling the 3.2% rise of the emerging markets benchmark. The largest vintage year in the developed markets index, 2006, generated an 8% return for the quarter. In the emerging markets index, 2007 was the largest vintage; it rose 4.0%. Because the Cambridge Associates indices are capital weighted, the largest vintage years are the principal drivers of their performance.
Funds raised in 2004 generated the period’s highest returns among the top-sized vintages of each benchmark, earning 9.4% and 6.6%, respectively, for the developed markets and emerging markets indices. Media companies were the chief driver of the 2004 vintage’s performance in the developed markets index, while IT companies were the main contributor to the same vintage’s return in the emerging markets index.
Both benchmarks turned in strong performances versus comparable public market indices for the quarter and for the majority of other time horizons provided in the table below. The developed markets index outperformed the MSCI EAFE public equity index in all periods listed. The emerging markets index bested its public market counterpart, the MSCI Emerging Markets Index, in all periods except the 10- and 20-year marks. All returns are in US dollars and are annualised for periods of one year and longer
