Estimating Private Equity Alpha From Fund-Level Cash Flows
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School of Business |
Bachelor's thesis
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Authors
Date
2023
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
21
Series
Abstract
This thesis examines the performance of European private equity funds compared to the public markets. Previous studies have predominantly centered on private equity funds based in the US. The objective of this study is to explore the performance of European-based funds, aiming to gain insights into their returns and overall performance. The data used in this thesis is collected from Preqin, and it includes detailed information about funds’ absolute returns, cash flows and various fund characteristics. This study's sample comprises 391 European-based private equity funds with vintages ranging from 1989 to 2014. Funds are categorized into Buyout, Venture Capital and Other Funds and the returns compared to the public market index are calculated using fund-level cash flows. Outperformance versus the MSCI Europe Index across all fund categories averages 27% over the fund’s lifespan, equivalent to an annual excess return of roughly 3%. Buyout funds emerge as the top performers with an outperformance of over 30% throughout the fund’s duration. A thorough analysis of performance across fund groups and vintages unveils substantial variations in both absolute and relative returns among different funds over time.Description
Thesis advisor
Kokkonen, JoniKeywords
private equity, buyout, venture capital, public market equivalent