Red Rocks Capital

RED ROCKS CAPITAL GLOBAL LISTED PRIVATE EQUITY (GLPE) ADVANCES IN Q1 2015

GLPE INDEX UP 5.32% IN Q1 DESPITE CONTINUED CURRENCY HEADWINDS

Golden, CO - April 15, 2015 - (PR NEWSWIRE) - Red Rocks Capital, an asset management firm specializing in listed private equity securities, announced today that its Global Listed Private Equity (GLPE) finished the first quarter of 2015 up 5.32%, compared to 2.47% for the MSCI World Index.  Strong performance from many of the larger index constituents around the world overcame the negative currency impacts of the continued strengthening of the US Dollar.

“Listed Private Equity firms had a strong quarter, outperforming global indices despite a negative impact of almost 4% from the stronger dollar,” said Mike Trihy, GLPE Index Manager at Red Rocks Capital.  “The dollar volume of U.S. buyout deals in Q1 was the highest level since Q3 2007** and PE firms benefitted from increased portfolio valuations around the globe, with positive developments for portfolio companies in Europe, North America and Asia.”

 

Bloomberg data from 3/31/2010 - 3/31/2015
*Past performance does not guarantee future results
**Source: Preqin, 4/1/2015

 

APRIL 2015 PRIVATE EQUITY PERSPECTIVES

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HIGHLIGHTS FROM THE 2015 BERLIN SUPERRETURN PRIVATE EQUITY CONFERENCE

Each February, 1,500+ leading venture capital and private equity managers and limited partners convene in Berlin for the SuperReturn International Global Private Equity Conference.

Several highlights from the recent conference included:

Despite Uncertainty, Private Equity Remains Bullish on Europe
Executives from private equity firms such as Carlyle, Blackstone and Terra Firma suggested that European companies were now more open to selling distressed assets, and that sales related to bank bailouts by local governments could provide one of the best opportunities, suggesting that European deals in the short-term would probably be valued at 500 million euros to 2 billion euros.

Secondary Discounts Have Narrowed 
According to a UBS survey, the demand for secondary market for private equity partnerships has continued to be strong.  The discount to NAV was 4.9% in the 4th quarter of 2014, down significantly from the 8.9% discount in 2nd quarter of 2013, and the 18.7% discount in the 4th quarter of 2011.  UBS estimated the secondary market volume for 2014 was $37.5 billion.

Ares Upbeat on Private Debt Opportunities
Mike Arougheti, the co-founder of Ares Management, is upbeat on opportunities in private debt in Europe.  Despite the signs of froth in the market, he believes that prospects for private debt in Europe are good and pointed out that listed vehicles could be the market’s next “boom.”  He added that the market could look to more permanent sources of capital, with firms raising long-term listed credit vehicles, such as business development companies, which are common in the U.S. but not currently allowed in Europe.

Private Equity Manager Performance Persistence
Picking a PE manager based on past performance does not guarantee future results, and past academic studies have provided mixed evidence for performance persistence for PE managers.  Oliver Gottschalg, Head of Research at PERACS and Professor at HEC, suggested that after correcting for the methodological IRR bias and expressing performance net of public market returns, there is statistically significant evidence of some performance persistence for private equity managers.

Private Equity Prepares for the Millennial Generation
James Coulter, co-founder of TPG Capital, suggested that in the next 10 years, the PE industry would be subject to unprecedented changes due to the "millennial generation", including continued growth overall but with fewer funds; changes in fees to amounts drawn and not on commitments; the length of fund terms will change to both beyond the typical 10 years as well as shorter durations; and growth in co-investments by investors will continue.

http://www.icbi-superreturn.com/

RED ROCKS CAPITAL GLOBAL LISTED PRIVATE EQUITY INDEX CONTINUES TO PROVIDE LONG-TERM PERFORMANCE COMPARABLE WITH TRADITIONAL PE BENCHMARK

February 20, 2015 – GOLDEN, CO – (BUSINESS WIRE) -- Red Rocks Capital, an asset management firm specializing in listed private equity securities, announced today that, through the period ending September 30, 2014, the performance of its Global Listed Private Equity (GLPE) continues to provide long-term performance comparable with the Cambridge Associates Global Buyout & Growth Equity Index®.

The Cambridge Associates Global Buyout & Growth Equity Index® is a widely followed private equity benchmark and is an end-to-end calculation based on data compiled from 1,753 global (U.S. & ex U.S.) buyout and growth equity funds including fully liquidated partnerships, formed between 1986 and 2014. 

February 20, 2015 – GOLDEN, CO – (BUSINESS WIRE) -- Red Rocks Capital, an asset management firm specializing in listed private equity securities, announced today that, through the period ending September 30, 2014, the performance of its Global Listed Private Equity (GLPE) continues to provide long-term performance comparable with the Cambridge Associates Global Buyout & Growth Equity Index®.

The Cambridge Associates Global Buyout & Growth Equity Index® is a widely followed private equity benchmark and is an end-to-end calculation based on data compiled from 1,753 global (U.S. & ex U.S.) buyout and growth equity funds including fully liquidated partnerships, formed between 1986 and 2014. 

 

Sources: Bloomberg, Cambridge Associates, Red Rocks Capital
Past Performance is no guarantee of future results. One cannot invest directly in an index.

Annualized returns as of 9/30/2014

5 Years

10 Years

15 Years

Cambridge Global & Growth Equity Index® 15.47% 13.89% 11.96%
Global Listed Private Equity (GLPE) Index 12.85% 8.22% 11.04%
S&P 500 Index 15.69% 8.10% 4.87%

Sources: Bloomberg, Cambridge Associates, Red Rocks Capital
Past Performance is no guarantee of future results. One cannot invest directly in an index.

 

MARCH 2015 PRIVATE EQUITY PERSPECTIVES

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Q4-2014 IN REVIEW

OVERVIEW

2014 and the fourth quarter proved to be positive for listed private equity and its investors. Our outlook for private equity is positive as we enter 2015 as the markets continue to show an appetite for the underlying holdings of publicly-traded private equity names.

We see a number of potential IPOs (Initial Public Offerings) on the horizon in both Europe and in the USA. Debt remains cheap and available on a global basis. At this juncture we do not see any financial crisis on the horizon.

As we look forward, potential negatives include a competitive environment for deals and new capital deployment, global tensions related to Russia, instability caused by falling energy prices, and a market that may become overpriced in terms of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multiples.

Within the global private equity investment class, we have observed companies providing better disclosure, increased global analyst coverage, and significant interest from new clients. We believe that all of these items, when looked at collectively, continue to reinforce the desire for a liquid private equity product and suggest to us we are likely to see more private equity names going public in the future.

OUTLOOK

We see a steady stream of new private investment opportunities as sidelined capital continues to be deployed. Additionally, we expect to see a broader reach into the developing markets and into Europe where assets prices have become less expensive than in the USA. 

We are alert to potential and significant interest in the energy space given recent commodity price action and we expect to see an ongoing stream of asset realizations (either strategic or as IPOs) as 2015 unfolds. All in all, we believe that 2015 is setting up to be a decent year for private equity and its investors.

As always, we appreciate your continued support and interest in Red Rocks and the Listed Private Equity strategy.

Mark Sunderhuse
Co-Portfolio Manager

FEBRUARY 2015 PRIVATE EQUITY PERSPECTIVES

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A Longer Term Look at Listed Private Equity

As part of a larger study on the listed private equity (LPE) universe, our analyst team looked at historical and back-tested returns and other characteristics of the Global Listed Private Equity (GLPE) Index versus several other major equity indices.  
We discovered some interesting data:

  1. For the years 1997 through 2014, we found that the GLPE* significantly outperformed S&P 500, MSCI ACWI, and Russell 2000.  Most of all, we were surprised by the 400 bps outperformance vs. Russell 2000, an index that represents companies whose operations may most closely resemble the underlying companies in the private equity constituents of the GLPE.
  2. Although annualized standard deviation was higher for GLPE (23.17%) than other comparable indices (15.64% for the S&P 500; 16.23% for the MSCI ACWI; and 20.46% for the Russell 2000), the Sharpe Ratio for the GLPE, at 0.53, was higher than the other indices (0.50 for S&P 500; 0.42 for MSCI ACWI; and 0.41 for Russell 2000), indicating a more favorable return vs. risk tradeoff.
  3. Up capture vs. MSCI ACWI was 1.44, indicating a favorable response to up markets. Down capture vs. MSCI ACWI was 1.12,  which is a reasonable down market response, given the volatility of the listed private equity asset class.
  4. GLPE Correlations were 0.811 vs. S&P 500; 0.888 vs. MSCI ACWI; and 0.811 vs. Russell 2000, indicating that there is little diversification benefit from private equity.  These numbers are consistent with a recent academic study that approximated equity correlation of traditional unlisted private equity at 75%, indicating little diversification benefit for private equity.**

12/31/1996 - 12/31/2014
Past Performance and the resultof hypothetical back testing are not indicative of future results
 
*See important disclosures regarding GLPE and back-tested returns at the end of this document.
**Financial Analysts Journal, Volume 70 Number 3, May/June 2014: “Asset Allocation: Risk Models for Alternative Investments” by Niels Pedersen, Sébastien Page, CFA, and Fei He, CFA