We examine the predictive power of the net asset value (NAV)/price ratio for the LPX50 index, a key benchmark in the field of listed private equity, using monthly data from 2002 to 2024. A risk factor model reveals the index’s significant exposure to small-cap and value stocks. Autocorrelation tests indicate market inefficiencies and suggest potential predictability of future returns. Both in-sample and out-of-sample analyses confirm the NAV/price ratio as a significant predictor of future returns, particularly over longer investment horizons and when excluding periods of financial instability. When the index’s NAV is relatively high compared to its market price, investors can increase their exposure to value risk and potentially achieve excess returns. Our study offers practical insights for fund managers and institutional investors seeking to navigate this emerging asset class and underscores the relevance of fundamental valuation metrics in predicting returns.
Authors: Arthur Enders, Michèl Degosciu, Karl Schmedders, Maximilian Werner
Publication date: 7 June 2025
Published in: The Journal of Portfolio Management
Volume/ Ausgabe: Volume 51, Issue 7
Source download link: https://www.pm-research.com/content/iijpormgmt/early/2025/06/07/jpm20251736