DGAP-News: Study: Private equity beats stock market over long term by 7 percent
(firmenpresse) - Golding Capital Partners GmbH / Key word(s): Study
05.10.2010 13:24
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Study: Private equity beats stock market over long term by 7%
Finding Alpha - A private equity study by Golding Capital Partners and HEC
School of Management
- For the first time, this study covers more than 4,000 realised
transactions in Europe and the USA from 1977 to 2009
- Long-term excess return of 7.1% compared with the stock market
- During recessions the outperformance rose to 15.5%
- Adjusted for leverage effect
Munich, 5th October, 2010 - Private equity earns an excess return of 7.1%
over the stock market in the long term. Especially during weak economic
market phases, investments in private equity are significantly more
successful than publicly listed shares. Private equity's relative
outperformance (alpha) thus behaves anticyclically relative to equity
markets. This is the result of a recent study conducted by Golding Capital
Partners and the HEC School of Management in Paris.
The study analysed more than four thousand private equity transactions from
Europe and the United States during the years 1977 to 2009, setting them
against comparable investments in the stock market. 'Using a very broad set
of data, this study enabled us to prove for the first time that private
equity investments earn a higher return than the stock market, resulting in
an average alpha of 7.1% for private equity,' as Jeremy Golding, Managing
Director of Golding Capital Partners, explains the results of the study.
The study calculates alpha for private equity on a transaction level,
independently of such factors as the timing of the investment, the chosen
sector and, above all, the higher leverage.
'The preconception that private equity firms earn their money solely by
burdening the companies they acquire with high levels of debt is wrong. On
the contrary, the reason for private equity's good performance lies in its
better corporate governance and in the specific know-how of the investment
managers. Moreover, managers usually hold a direct equity stake in the
company, keeping everyone pulling in the same direction,' says Johannes
Wendt, a Partner at Golding Capital Partners, in discussing the reasons for
private equity's alpha compared with investments in the stock market.
The study by Golding Capital Partners and HEC shows that a negative
correlation exists between the private equity alpha and stock market
performance throughout the economic cycle. It calculates a private equity
alpha of 15.5% by comparison with the equity market during times of
recession.
In a stable market environment, the alpha still amounts to 10.6%, and to
5.1% during phases of moderate growth. Only private equity investments made
during boom times are unable to generate any additional return in
comparison with shares over the same period.
'Especially during difficult market phases, private equity investments
outperform the stock market. Private equity funds are able to provide
effective support to their companies during difficult market phases, thus
allowing them to withstand downturns better than stock markets,' notes
Oliver Gottschalg, a professor at HEC School of Management in Paris.
About the study
The 'Finding Alpha' study was conducted jointly by Golding Capital Partners
and HEC School of Management. It analysed over 4,000 relevant transactions
from 1977 to 2009, especially from Europe and the United States. The
Golding Capital Partners transaction database provided the data set. As-yet
unrealised transactions were eliminated from the analysis.
About Golding Capital Partners
Golding Capital Partners GmbH is the leading independent German
fund-of-funds manager for private equity, mezzanine and venture capital in
Germany. A staff of more than 35 in Munich, San Francisco and Luxembourg
support institutional investors in building their private equity
programmes. Golding Capital Partners currently has more than EUR1.6 billion
under management and has invested in over 100 private equity funds
worldwide to date. Its more than 80 institutional investors include
insurance companies, pension funds, foundations and banks, especially
savings banks and public-sector banks.
About HEC School of Management
HEC (Ecole des Hautes Etudes Commerciales) is considered to be one of the
leading elite European teaching and research universities in the field of
company management. HEC offers the top managers of tomorrow a spectrum of
degree courses that is as broad as it is remarkable; i.e. various Masters
courses (MSc programmes and Specialized Masters), an MBA programme (full
time or after-work), a PhD programme and the TRIUM Global Executive MBA.
In the international Financial Times ranking, HEC was named Europe's best
business school for the fourth year in a row.
Further information:
IRA WÜLFING KOMMUNIKATION GmbH
Ira Wülfing
T +49.(0)89. 2000 30-33
F +49.(0)89. 2000 30-40
ira(at)wuelfing-kommunikation.de
05.10.2010 13:24 Dissemination of a Corporate News, transmitted by DGAP -
a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.
DGAP's Distribution Services include Regulatory Announcements,
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Media archive at www.dgap-medientreff.de and www.dgap.de
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Language: English
Company: Golding Capital Partners GmbH
Möhlstrasse 7
81675 München
Deutschland
Internet: www.goldingcapital.com
End of Announcement DGAP News-Service
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Datum: 05.10.2010 - 13:24 Uhr
Sprache: Deutsch
News-ID 32309
Anzahl Zeichen: 0
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Kategorie:
Business News
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