Research Papers

Private equity funds from the emerging Asia-Pacific region seem to require more time to mature than their Western peers, as the portion of the unrealized value (RVPI) to total created value (TVPI) is systematically larger for APAC relative to Western markets. This could indicate a more demanding exit environment or a different market structure…

Q2 2019 has recorded the highest average of the performance of active VC funds over the last ten years. Selection risk increased and is back to the 2015-2016 level. On a risk-adjusted basis, the performance is thus impressive, but mostly unrealized as investors are holding the assets for more extended periods.

Historically private infrastructure funds have shown fairly resilient performance and a very low loss ratio. On a pooled average basis, European infrastructure funds provide some of the highest returns, with a TVPI of 1.43, compared with 1.32x for North American funds and 1.38x for all funds globally. None of the analyzed vintage years…

Average times-to-liquidity are a useful bench-marking instrument for fund investors. The time-to-liquidity of fully realized funds ranges from 4.1 years for mezzanine funds to 5.6 years for early-stage venture capital funds. These elements are interesting in anticipating the theoretical time-exposure of investors. However, they might aggregate significant variations from one vintage year to another.

The first half of 2019 sees active LBO funds maintaining a high level of performance. Selection risk has decreased significantly, as well as time-to-liquidity, both hinting at a wave of new investments during that period. Recurring low interest rates and high levels of liquidity are also supportive of exits and dividend recapitalizations.

In most of modern finance, things tend to matter only if they can be measured precisely and frequently. By contrast, in alternative investment, that which matters most – performance – is remarkably difficult to pin down. Knowing what the precise performance is, of any fund, region or market, at any moment in time, is a complicated process, layered with judgement and requiring context. Perhaps this is why so much attention is paid to activity, sentiment and anecdote. But it is possible to understand more, if you have access to the right data and the patience to interpret it. One intriguing headline from our data could be: ‘China overtakes the US as the top performing VC market.’ However, much of that value is unrealized.

The profitability and investment potential into AI is not a contentious topic. But to what extent could AI disrupt and enhance the actual process of investing in alternatives itself?

We believe the scope for added value is significant, and growing quickly, both in terms of delegated investments and direct investment into high potential companies. This paper outlines some of the areas of investing into alternative investments (AI) where we think the application of artificial intelligence (AI) already makes sense and where it will become increasingly relevant in the future.

The quarterly movements of multiples of US LBO funds and major US stock indexes appear to be significantly positively correlated, and this observation is further amplified during the bullish market periods immediately before the markets contracted. US LBO funds exhibit consistently lower volatility of performance relative to the public market indexes. Fund managers need to see two successive quarters of strong and consistent shifts in public markets to reflect it significantly in their TVPIs. The main philosophy is to adjust portfolio values moderately but in line with the indexes, sometimes catching up with sustained strong movements.