Red Rocks Capital

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.”

 

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.

JULY 2014 PRIVATE EQUITY PERSPECTIVES

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

PRIVATE EQUITY VALUE CREATION
Contrary to how private equity has been characterized, value is created primarily from operational improvement, not leverage.

Capital Dynamics, a global private equity firm, conducted a joint research study with Technische Universität München to evaluate value creation in private equity deals.  Their study performed an in-depth analysis of 701 exits of private equity-backed companies between 1990 and 2013, looking at sales, EBITDA, multiples, net debt, cash flows and so on.

Its findings? That leverage actually accounted for less than a third (31 percent) of the value created at these businesses during the period of private equity ownership.  “…more than half the value uplift – 51 percent – came from operational improvements, much of which was attributable to EBITDA growth (which in turn was more driven by sales growth than cost-cutting). And of the multiple expansion that accounted for the remaining 18 percent, the majority was due not to general market movements, but to improvements in the overall quality of the specific asset under private equity – which is part of the operational piece too.”

VALUE CREATION DRIVERS