Research

Predicting Returns of Listed Private Equity

Posted on | by Hammad

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

Market efficiency: do listed private equity ETFs adapt?

Posted on | by Hammad

This research provides a comprehensive analysis of market efficiency under the efficient market hypothesis (EMH) and adaptive market hypothesis (AMH) frameworks within the listed private equity (LPE) market. An underexplored area in financial research, LPE provides the unique combination of traditional private equity’s high return potential and the liquidity of public markets. The opaqueness of daily valuing of private equity investments could result in market inefficiencies due to frictions even in public markets.

Authors: Seth A. Hoelscher, Andrew C. Meek
Publication date: 28 May 2025
Published in: Managerial Finance
Volume/ Ausgabe: 
Source download link: https://www.emerald.com/insight/content/doi/10.1108/mf-07-2024-0542/full/html

PE Market Dynamics: Beyond the Surface

Posted on | by Hammad

This study examines return and volatility spillovers between different regional private equity markets and investment styles to analyze the dynamics of connectedness. Using the LPX Group’s listed private equity indices from 2004 to 2023, we find significant fluctuations in return and volatility spillovers over time, with peaks occurring during major financial events. Notably, the peaks in the volatility spillovers are more abrupt but less persistent than those in the return spillovers. Our analysis reveals no direct correspondence between return and volatility spillovers, suggesting that they measure different aspects that should be considered in active portfolio management. The LPX America index is a net transmitter for the LPX Europe index, except during specific European events. In addition, the LPX Buyout index is identified as a consistent net transmitter of return spillovers, whereas the LPX Mezzanine index shows higher net volatility spillovers. Conversely, the LPX Venture index is consistently a net receiver, highlighting its diversification potential for both private equity and traditional stock market investors. These findings provide essential insights into portfolio allocation, risk management, and strategic planning in private equity investing.

Authors: Antonio Diaz, Carlos Esparcia, Lars Tegtmeier
Publication date: 2 April 2025
Published in:International Review of Economics & Finance
Volume/ Ausgabe: 
Source download link: https://www.sciencedirect.com/science/article/pii/S1059056025002503

Modelling listed Private Equity in South Africa

Posted on | by Hammad

This paper uses advanced econometric methods to explore the statistical properties, volatility dynamics, and macroeconomic determinants of Listed Private Equity (LPE) investments in South Africa from 2010 to 2023. The key objectives include testing for non-normality in LPE returns and assessing volatility clustering. By employing GARCH-family models, the study effectively captures asymmetric and long-memory effects in LPE returns. A VAR model combined with Impulse Response Functions quantifies the impact of macroeconomic shocks, revealing that inflation imposes a significant and sustained adverse effect on LPE returns. In contrast, GDP growth exerts a weaker, short-lived positive influence. The findings also highlight the dynamic Relationship between corporate strategies and market volatility, showcasing how firms adapt to and influence volatility through diversification, hedging, and sectoral realignment. These results are consistent with contemporary theories on strategic responses to volatility (Jiang et al., 2021). Furthermore, the DCC MGARCH results suggest minimal volatility spillovers within the South African LPE market, indicating reduced systemic risks and opportunities for adequate portfolio diversification. The study provides a framework to enhance risk management and informed decision-making within South Africa’s LPE market. Future research should extend these insights by investigating cross-border spillover effects and examining how regulatory frameworks can stabilise the LPE sector.

Authors: Chricencia Makanyara MURAPE, Raphael Tabani MPOFU
Publication date: 31 December 2024
Published in: Prizren Social Science Journal
Volume/ Ausgabe: Vol. 9, Issue No. 1; 2025
Source download link: https://www.lpx-group.com/wp-content/media%20posts/2025_Murape_Mpofu.pdf

Empirical Analysis of PE, Listed PE and Public Equity

Posted on | by Hammad

It is not a secret that the world of Private Equity is growing year by year, with an immense upwards trend and that the willingness of understanding how Private Equity as an alternative capital raising strategy can be used by companies which do not want to go public and get financed by Public Equity. The underlying paper investigates the world of Private Equity, Listed Private Equity and Public Equity. Regarding transparency of data, the comparability of Public Equity to Listed Private Equity provides way better results than comparing Public Equity to Private Equity. Due to the listing of the firms, the disclosure requirements need to be fulfilled. The GLPE Index illustrates and underlines the effectiveness of Listed Private Equity as a financing source. The GLPE Index contains 40 to 75 listed Private Equity firms which mostly invest Private Equity in firms that are not listed. However – The top ten constituents of this index show their diversification considering the companies they have invested in and their performance, the countries in which the Headquarter are located and the performance of these funds. One can see clearly that 2021 was an extra ordinary year for all of them. They achieved returns and performance better than indices like the MSCI World and S&P 500.

Authors: Ernst Fahling, Celina Fünfgeld andRobert Kelm
Publication date: 26 March 2023
Published in: International Journal of Financial Research
Volume/ Ausgabe: Vol. 14, No. 2; 2023
Source download link: https://www.lpx-group.com/wp-content/media%20posts/2023_Fahling_et_al.pdf

Tail risks and private equity performance

Posted on | by Robin Jakob

We examine the drivers of private equity in response to the fully exogenous Covid-19 shock, employing listed private equity as a proxy for traditional non-listed private equity. This approach enables us to reliably measure firm characteristics and performance in real-time. Listed private equity firms, on average, underperformed significantly during the crisis, with a performance drop ranging from 9.2 % to 43.6 %, depending on the model used. However, there is substantial cross-sectional variation driven by unique firm-level attributes including access to capital, liquidity, transparency, and ownership structure. Listed private equity with better access to capital and higher transparency shows resilience during the crisis, while higher illiquidity and opacity exacerbate the negative effects. This study offers early evidence on Covid-19′s impact on private equity firms, highlighting value drivers and performance dynamics of this alternative asset class during a period of extreme tail risk.

Authors: Hrvoje Kurtović / Garen Markarian
Publication date: 1 December 2023
Published in: Journal of Empirical Finance
Volume/ Ausgabe: Volume 75
Source download link: https://www.sciencedirect.com/science/article/pii/S092753982300124X