Tech assets drive private equity returns

Private equity massively outperformed listed equities in the 12 months to 30 June 2018, by 20.4% to 6.9%, according investment firm Cambridge Associates.

The 20.4% private equity returns is from the Cambridge Associates Global ex-US Developed Markets Private Equity Index, while the equity return is from the MSCI index for large and mid-cap securities in Europe, Australasia and the Far East. Cambridge Associates attributed the performance of private equity to the allocations made to technology, which it said produced the highest returns in the first half of 2018. At the same time, private equity firms invested less in the financial services sector, which has delivered low returns.

Cambridge Associated head of private equity and VC research, Nicolas Schellenberg, commented: “Private equity funds have made a calculated bet on overweighting technology which has paid off.” But he added: “However, private equity is a lagging asset class, so the recent dip in technology valuations seen in the public markets is yet to be reflected in valuations.”

And according to State Street Global Exchange Private Equity Index, private equity returns slowed down in the third quarter of 2018 to 3.03%. State Street said that 2018 has been a record fundraising year for private equity, and deploying capital is challenging for private equity managers, as interest rates rise, the US dollar strengthens and trade war threats intensify.