Private Equity Asset Class Performance
Private equity performance statistics should always be analysed with some scepticism; because they are extremely unreliable and inconclusive. Gavin explains why this is the case by analysing the key performance metrics: Internal Rate of Return (IRR), Cash Multiple, Distributions to Total Value (DVTV) and Residual Value to Total Value (RVTV).
Overview
The private equity (PE) asset class is notoriously opaque, when it comes to divulging information about the performance of investments and funds. Private equity performance statistics should always be analysed with some scepticism. The two main methods to analyse private equity performance are the Public Market Equivalent method, which benchmarks against listed companies or an index; and Value Attribution Analysis, which traces the sources of value creation in an investment. Historically, the PE asset class has returned between 9 and 12% on average; and the top/bottom quartile spread is over 20%.
Key learning objectives:
What are the key performance metrics?
How does PME work?
How does VAA work?
Summary
Expert
Gavin Ryan
Gavin Ryan has twenty years’ experience as a private equity fund manager. He has managed a $30m Advent International Affiliate Fund, a $200m Fund part of Soros Fund Management and a €2.5bn Green Energy Asset Manager. Before he was in investment banking with HSBC and Nomura. Gavin has an Engineering Degree from Cambridge and an MBA from McGill.
