Tracking Private Equity. Understanding the fundamental drivers of private equity performance.
Preview
Private equity performance can’t be replicated exactly in the public markets, but many of the fundamental drivers of private equity performance can be found in there.
Historically, a lack of transparency has made it difficult to distinguish the value-add of private equity from publicly accessible drivers of returns.
MSCI’s new deal-level fundamental dataset makes that possible. This dataset allows us to separate the portion of performance that can be replicated in public markets from the unique value added by private equity.
In this paper, we estimate exposures to investible factors representing many characteristics of private equity. The exposures are not surprising: Buyouts tend to tilt to high growth, leverage, value and low size. Ventures have even larger exposure to growth, and much less leverage.
What may be surprising is how much these exposures have contributed to performance.
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The MSCI Private Equity Model
Our new framework links financial markets to macroeconomic factors, focusing on cash flows, discount rates, growth and inflation. It helps investors in their capital-market assumptions, risk management and asset allocation, using the MSCI Macro-Finance Model.
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