Private equity earns strong returns outside the U.S., where developed markets are its safest bet.
Private equity investments in non-U.S. developed markets continue to out-perform private equity investments in emerging markets, according to data released today by Cambridge Associates. The results are true for both venture capital and buyouts deals, and is through the end of Q2:
The developed markets index increased 6.7% return during the quarter ending June 30, 2011, more than doubling the 3.2% rise of the emerging markets benchmark. The largest vintage year in the developed markets index, 2006, generated an 8% return for the quarter. In the emerging markets index, 2007 was the largest vintage; it rose 4.0%. Because the Cambridge Associates indices are capital weighted, the largest vintage years are the principal drivers of their performance.
Funds raised in 2004 generated the period’s highest returns among the top-sized vintages of each benchmark, earning 9.4% and 6.6%, respectively, for the developed markets and emerging markets indices. Media companies were the chief driver of the 2004 vintage’s performance in the developed markets index, while IT companies were the main contributor to the same vintage’s return in the emerging markets index.
The top performing emerging market was Russia, with a 59.8% return for Q2. Mainland China (4.9%) and India (0.8%) also produced positive figures, while Cambridge Associates reports negative figures for Japan (-6.7%), Brazil (-2.4%) and South Korea (-2.4%). Nearly half the sample comes from Mainland China and India.
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