Private Equity

Abstract

This article examines how private equity affects the performance of an investment portfolio which is primarily weighted in listed equities. Quarterly performance data across a 10-year period (1991–2001) for eight listed equity benchmarks is tested in relation to eight private equity fund categories. The results show mixed support for the belief that private equity funds have low correlations with listed equities. “Venture Seed/Start-up funds,” “Mezzanine funds,” and “Private Equity Special Situation” funds are uncorrelated with listed equity, while “Venture Early Stage,” “Venture Late Stage,” “Venture Balanced,” “Venture All,” and “Buyout funds” are correlated to some degree. By combining each private equity category with listed equities investors can improve the risk-return profile of their portfolio.