Measuring Private Equity Returns and Benchmarking Against Public Markets

BVCA Research Report, February 2012

26 Pages Posted: 11 Feb 2012

See all articles by Colin Ellis

Colin Ellis

Hult International Business School (London)

Sonal Pattni

British Private Equity & Venture Capital Association (BVCA)

Devash Tailor

British Private Equity & Venture Capital Association (BVCA)

Date Written: February 10, 2012

Abstract

Private equity is still a relatively young asset class, with some unique characteristics. One feature is the very irregular timing of cash flows, and a consequence of this is that private equity relies on measures of returns that are not standard in other asset classes. As such, new investors can be unclear or unaware of the differences between the common methods for measuring private equity performance and comparing it with returns from other asset classes. This paper sets out different methods for measuring private equity returns that are commonly used in the industry and constructs aggregate indices for the UK asset class. It also considers methods for comparing private and public equity returns and demonstrates the importance of considering cross-sectional variation between public and private equities.

Keywords: private equity, performance measurement, aggregation, public comparisons

JEL Classification: G24

Suggested Citation

Ellis, Colin and Pattni, Sonal and Tailor, Devash, Measuring Private Equity Returns and Benchmarking Against Public Markets (February 10, 2012). BVCA Research Report, February 2012, Available at SSRN: https://ssrn.com/abstract=1986783

Colin Ellis (Contact Author)

Hult International Business School (London) ( email )

35 Commercial Road
London, E1 1LD
United Kingdom

Sonal Pattni

British Private Equity & Venture Capital Association (BVCA) ( email )

1st Floor North, Brettenham House
Lancaster Place
London, WC2E 7EN
United Kingdom

Devash Tailor

British Private Equity & Venture Capital Association (BVCA) ( email )

1st Floor North, Brettenham House
Lancaster Place
London, WC2E 7EN
United Kingdom

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