The numbers have it. PE performance stands out from the equities crowd. Contrary to a commonly held assumption that private equity investments performed badly during the financial crisis in comparison with other asset classes, a study released this week by Golding Capital and performed by HEC reveals in fact that PE is performing rather well.
Claiming to be the first empirical analysis of the relative performance of private equity during the financial crisis, the study reports that transactions closed in the years 2006 to 2008 achieved an “exceptionally positive alpha” of 20.5 %. It says that even measured in absolute returns, these private equity deals were positive at 2.7 % and 5.1 % respectively.
Comparable stock market returns were negative at -2.4 % and -15.4 %. Private equity’s long-term average alpha is 9.7 %. This average value is calculated on the basis of more than 5,200 relevant transactions completed between 1977 and 2011.
Founded in 1999, Golding Capital is a PE advisory firm guiding about EUR 2.5 billion in assets. It clients include German insurance companies, pension funds and banks, particularly savings banks and cooperatives.