The Coefficient of Determination for ListedPrivate Equity Funds

The performance of thirteen private equity (PE) firms listed in U.S. and having operations in North America was compared with the performance of a diversified investment portfolio. The Sharpe and Treynor ratio results indicate that a majority of these PE firms beat the major U.S. stock indices. An attempt was made determine the best predictors for each of the PE firms. The predictor variables used to establish the relationship include various market indexes: DJIA, NYSE, NASDAQ, S&P 400, S&P 500, and S&P 600. The predictive relationship with market variables could not be established for a majority of firms. Seven out of the thirteen funds showed no significant relationship with market variables. The predictive relationship could be established only for six out of the thirteen firms. In the case of three out of the six PE firms, the best predictor relationship was a single market variable. TOPICS:Private equity, statistical methods, performance measurement