Understanding private equity’s outperformance in difficult times - Jaunary 2012

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1、DavidLaytonPrivateEquityInvestments,Hans-UlrichMüllerOperatingPartnerGuyWallerInvestmentSolutionsEuropeUnderstandingprivateequity’soutperformanceindifficulttimesPartnersGroupResearchFlashJanuary2012Dr.StephanSchäliPartner,HeadPrivateEquityFlorianDemleitnerSeniorVicePresident,PrivateEquityDirects1Par

2、tnersGroupResearchFlashJanuary2012Understandingprivateequity’soutperformanceindifficulttimesEXECUTIVESUMMARYManystudiesconfirmthatprivateequityinvestmentshaveconsistentlyoutperformedpublicequitymarkets.Acommonprejudiceisthatthissuperiorperformanceisattributabletothehigherriskthatprivateequityinvesto

3、rstake.Therefore,privateequityisviewedasanunattractiveassetclassduringdifficultmacroeconomicenvironments.Wehavelookedatthishypothesisfromvariousanglesandfoundevidencethatitisnotjustified:Privateequityinvestmentsbeatpublicequitiesandofferanattractiveriskprofileatthesametime.Thisisprovencorrectespecia

4、llyinachallengingmacroeconomicenvironment.Privateequity’soutperformanceoverpublicequitiesincreasesfurtherwhilevolatilitystillremainslower:Since2000,privateequityinvestmentshaveoutperformedtherespectivepublicequityindicesby5%inNorthAmericaand9%inEuropeperannumIntheaftermathoftheburstoftheinternetbu

5、bble(Q22000toQ12003),privateequityinvestmentsoutperformedpublicmarketsby6%inNorthAmericaand20%inEuropeonanannualizedbasisDuringthefinancialcrisisfromQ32007toQ12009,privateequityinvestmentsbeatpublicmarketindicesby19%inbothNorthAmericaandEuropeonanannualizedbasisTheseresultsimplythatprivateequityisa

6、particularlyattractiveassetclassintimesofhigheconomicuncertainty.Inordertoexplaintheseobviousdiscrepanciesinperformanceandrisk,onewouldhavetolookatthedifferencesbetweentheinvestmentapproachofaprivateequityinvestorsuchasPartnersGroupandapublicequityinvestor.Wefoundthreesystematicadvantagesthatareinhe

7、renttotheprivateequitybusinessmodel:Theselectionprocessisbasedontheoperationalperformanceofacompanyandin-depthinformationprovidedinaduediligenceprocess(“legalinsiders”)Theinvestors’long-termorientat