BENEFITS OF INTERNATIONAL DIVERSIFICATION: FOCUS ON THE UK LBO MARKET

We looked at the eFront Insight universe of the 20-year history of quarterly returns of regional pools of LBO funds to quantify the correlation structure between different regions. Getting exposure to less correlated markets enables the benefits from the UK limited partners diversifying their buyout portfolios away from their local region.

Zooming in on the minimum variance portfolio that represents 35% of total capital invested in the UK market and the remaining 65% in the constructed global portfolio shows that there is a significant increase in the achieved average return per unit of risk, improving from 0.78 to 1.19.

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