Thursday, March 8, 2012

Returns on Private Equity and Venture Capital Investments Outside the U.S. Turned Negative in Q3 2011

Still Handily Outperformed Comparable Public Equities for the Period

In U.S. dollar terms, the Cambridge Associates LLC Global ex U.S. Developed Markets Private Equity and Venture Capital Index dropped 8.4% for the quarter. The Cambridge Associates LLC Emerging Markets Private Equity and Venture Capital Index performed only marginally better, sliding 8.2%. Both, however, easily beat the returns of their comparable public market benchmarks, the MSCI EAFE and MSCI Emerging Markets, which fell 19.0% and 22.5%, respectively, for the period.The growing debt crisis in Europe and a strong U.S. dollar heavily impacted global returns on alternative investments during last year’s third quarter.

Private equity and venture capital funds that invest primarily in developed markets outside the U.S. as well as those that target emerging markets each posted a loss for the period. The last time funds of these asset classes in both developed and emerging markets recorded a negative quarter was for the three months ending June 30, 2010, according to Cambridge Associates LLC.

Both Cambridge Associates indices also performed well versus their public equity counterparts over other time horizons ending on September 30, 2011. The developed markets index outstripped the MSCI EAFE in every time period listed in the table below, and in all but one case (the three-year mark), by a margin of more than 10%. The emerging markets index was not quite as consistently dominant, but it still bested its public markets counterpart, the MSCI Emerging Markets, in all but two listed periods, the 10- and 20-year marks.

Cambridge Associates’ developed markets index tracks over 600 private equity and venture capital funds that invest primarily in Australia, Canada, Israel, Japan, New Zealand, and Western Europe. Cambridge Associates’ emerging markets index includes more than 350 private equity and venture capital funds investing mostly in companies in emerging Asia, emerging Europe, Latin America, and the Middle East ex Israel. Returns of both indices are based on limited partners’ fund-level performance and are net of fees, expenses, and carried interest.

Details and commentary


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