NAIC research. There is an emerging group with the PE fund management market in the US, diverse and minority-owned private equity firms, and this group, which is quite small at the moment, is producing superior investment returns compared to the general PE industry, according to a report called, Recognizing The Results, commissioned by the National Association of Investment Companies (NAIC), and performed by KPMG.
The NAIC is an industry association representing diverse and minority-owned private equity firms, which are listed on its website. NAIC invests in what it says is the fastest growing market in the US, so-called minority consumers, which will in fact form the majority of consumers in the not so distant future (see graphic).
The report compared the audited financial returns of NAIC firms against the broader private equity market across four industry benchmarks for the period 1998 – 2011 and the following is the result:
NAIC firms outperformed the upper quartile of the PE industry in realizing investment returns (20.9% vs. 11.8%)
on a median and capital-weighted basis, NAIC firms’ internal rate of return performance was superior to the upper quartile of the PE market and buyout subset
NAIC firms significantly outperformed the PE industry returning capital to investors (NAIC Firms 160% vs. 67.1% for all U.S. PE and 89.1% for Buyout subset)
In 7 of 10 Years, NAIC firms realized returns in the PE industry’s top quartile
The report authors say that despite the strong performance of NAIC firms, the significant majority of institutional investors do not invest capital in diverse and minority private equity firms. The fact that NAIC Firms collectively managed only 0.24% of total private equity assets at year-end 2011 is a sobering reality check. (Image source: NAIC)