Performance Indicators for Global
Buyout and Global Growth Equity Funds

Abstract

The study attempts to establish a relationship between return on global buyout and global growth indices and returns on equity indices of major world economies as well as U.S. GDP. Quarterly data from 1986 Q2 to 2013 Q1 were analyzed. Returns on a Global Buyout and Growth index (U.S. and ex U.S., U.S. only), a Global Buyout index (U.S. and ex U.S., U.S. only), and a Global Growth index (U.S. and ex U.S., U.S. only) were used as response variables and returns on the U.S. GDP, S&P 500, GSPSC, DAX, FTSE and CAC 40 were used as explanatory variables. It was observed that there is a clear pattern in terms of predictors of Global Buyout indices (U.S. and ex U.S., U.S. only), Global Growth and Buyout indices (U.S. and ex U.S., U.S. only) whereas the results for the Global Growth index (U.S. and ex U.S.) suggest that for growth equity investments the returns are dependent more on the ability of private equity investors to identify to the lucrative investments than on explanatory variables like the U.S. GDP, S&P 500, GSPSC, DAX, FTSE, and CAC 40. Therefore, to realize profits from private equity investments in growth companies the limited liability companies, have to look for those general partners who have the ability to identify high growth companies as the explanatory variables (market performance) are not significant contributors to profits from growth investments.

TOPICS: Private equity, global, statistical methods, equity portfolio management