Red Rocks Capital

SEPTEMBER 2014 PRIVATE EQUITY PERSPECTIVES

(To download a pdf file of this document, click here.)

PRIVATE COMPANIES INCREASE REVENUE FASTER THAN PUBLIC COUNTERPARTS

Since the recession ended in June 2009, some of the largest private companies in the U.S. have increased their revenue faster than their public company counterparts, according to a report from financial information provider Sageworks Inc.  Sageworks analyzed the annual sales growth and net profit margins of about 265 private companies during five consecutive 12-month periods through August 2014, using financial statements provided by accounting firms, banks, and credit unions.  The analysis focused on companies with annual sales of more than $500 million.  Sageworks also analyzed the financial results of some 2,100 public companies for the same five 12-month periods, using public disclosures by those companies. With the exception of one period, private companies tracked by Sageworks posted higher sales growth than their public company counterparts. For all five 12-month periods, private companies also reported higher net profit margins than public companies.

SALES GROWTH OF PRIVATE VS. PUBLIC COMPANIES

*Past performance is not indicative of future results

Much of this turnaround for private companies may be attributed to nimbleness and focus.  Although public companies were more stable during the recession, private companies have since operated without short-term shareholder scrutiny, enabling them to focus on longer term revenue enhancement and growth initiatives.
http://blogs.wsj.com/privateequity/2014/08/20/private-companies-increase-revenue-faster-than-public-counterparts/

 

GLOBAL LISTED PRIVATE EQUITY (GLPE) INDEX CONTINUES TO PROVIDE PERFORMANCE COMPARABLE WITH TRADITIONAL PRIVATE EQUITY BENCHMARK

GOLDEN, CO --(BUSINESS WIRE)-- Red Rocks Capital, an asset management firm specializing in listed private equity securities, announced today that the performance of its Global Listed Private Equity (GLPE) continues to provide performance comparable with the Cambridge U.S. Private Equity Index®.

The Cambridge index is a widely followed private equity benchmark and is an end-to-end calculation based on data compiled from 1,125 U.S. private equity funds and liquidated partnerships, formed between 1986 and 2013.

 
Sources: Bloomberg, Cambridge Associates, Red Rocks Capital.
Past performance is no guarantee of future results.  One cannot invest directly in an index.
 
 
“We are pleased that listed private equity continues to provide performance comparable with traditional illiquid private equity,” said Mike Trihy, who manages the GLPE Index at Red Rocks Capital.  “Private equity as an asset class represents over $3.3 trillion in AUM globally.  However, traditional private equity partnerships are illiquid and can be difficult for advisors and smaller institutions to access due to their large investment minimums, high fee structures and lack of transparency.  The Global Listed Private Equity (GLPE) index represents private equity firms who are listed and traded on an exchange that provide liquid and transparent access to this important asset class.”

 

FA Magazine - Private Equity’s Next Frontier: DC Plans

Private equity isn’t just for institutional and accredited individual investors anymore. To say it’s becoming democratized might be a little over the top, but it has become increasingly accessible to retail investors in recent years and will become even more so in coming years, said a panel of industry players on Thursday at the Fifth Annual Innovative Alternative Investment Strategies Conference in Denver. 

“There are ’40 Act funds such as ourselves coming into a space that’s growing,” said Mark Sunderhuse, co-founder, managing director, and co-portfolio manager at Red Rocks Capital. “People want these types of funds for the beta exposure. I think we’re just at the front end of this trend.”

To read entire article:

FA MAGAZINE - PRIVATE EQUITY’S NEXT FRONTIER: DC PLANS

http://www.fa-mag.com/news/private-equity-s-next-frontier--dc-plans-18804.html

PLEASE NOTE:
The information presented is for illustrative and educational purposes only. You should not assume that an investment in the securities mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell.  For private equity companies mentioned in this article, as of July 31, 2014:  Blackstone Group LP (BX), The Carlyle Group (CG), KKR & Co. LP (KKR), Pantheon International Participations (PIN LN) - Red Rocks Capital holds positions. 

 

AUGUST 2014 PRIVATE EQUITY PERSPECTIVES

(To download a pdf file of this document, click here.)

THE DISPARITY OF PRIVATE EQUITY INVESTMENT RETURNS

The actual returns experienced by private equity investors can vary greatly by the fund’s vintage year and PE manager.  As illustrated in the chart below from Preqin, there are dramatic differences in returns between top- and bottom-quartile private equity funds.  For the vintage years 1999-2010, the average returns of top quartile funds provided twice the returns of bottom quartile funds and 30%-50% higher than median fund returns.
 

To counter this disparity of returns, institutional investors build diversified portfolios of private equity investments across vintage, manager, and investment strategy, among other criteria.  The average investor, with limited funds and resources, often does not have this luxury.  As private equity has become more main-stream, alternative routes have emerged, such as fund-of-funds and listed private equity vehicles, to provide diversification and access to some of the top funds and PE managers without the restrictions of traditional illiquid LP interests.
RETURNS OF PRIVATE EQUITY FUNDS, 1999-2010 VINTAGE YEARS
Source: Preqin
 

Private Equity Continues Five-Year Run of Outperformance

GLPE INDEX CONTINUES TO RISE ON RECORD DEAL ACTIVITY AND OUTLOOK FOR PRIVATE EQUITY FIRMS

Download GLPE Factsheet

July 15, 2014  

Golden, CO – (BUSINESS WIRE) Red Rocks Capital, an asset management firm specializing in listed private equity (PE) investing, announced today that its Red Rocks Capital Global Listed Private Equity (GLPE) Index returned 21.31% per year vs. 18.82% per year for the S&P 500, for the five years ending June 30, 2014.