The Euro fluctuated in value against the dollar in the third quarter but ended the period slightly stronger than it began. International public equity indices performed well during the quarter, outpacing the private equity indices in the developed and emerging markets. In general, however, both private equity indices have outperformed or kept pace with the public markets over medium and long time horizons.
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Performance for the Cambridge Associates LLC Global ex U.S. Developed Markets and Emerging Markets Private Equity and Venture Capital Indices is derived from data compiled from institutional quality funds raised between 1986 and 2012. There are over 690 funds in the developed markets index and more than 410 in the emerging markets index. Based on that data, the private equity benchmarks’ returns versus public equity indices in developed ex U.S., emerging, and U.S. markets – the MSCI EAFE, MSCI Emerging Markets, and S&P 500.
Emerging Markets Performance Highlights:
? The emerging markets private equity index has remained concentrated by vintage year, sector, and geographic region.
? During the third quarter, there were only four vintage years that accounted for at least 5% of the index’s value. The 2007 vintage alone represented 36.7% of the index; combined the top four accounted for 82.4% of the total.
? In a reversal from last quarter, results for all of the meaningfully-sized vintages were positive; two vintages, 2005 and 2008, earned returns of 2.3% and two, 2006 and 2007, were up 3.5%. Financial services companies saw the biggest write ups in the vintage year 2005 funds and both retail and financial services contributed significantly to the 2007 vintage year’s return. No one sector dominated performance in vintage years 2006 and 2008.
? Emerging markets private equity and venture capital fund managers called $3.8 billion during the quarter, a 5.7% decrease from the prior quarter. Distributions equaled $2.1 billion, a 91.7% jump from what was the smallest quarterly distribution level in three years.
? Four vintage years, 2007, 2011, 2010, and 2006, represented 82.7% of all capital calls during the quarter; all four called
more than $500 million each. The 2007 vintage year fund managers were the only ones to call over $1.0 billion from investors. The 2005 and 2007 vintage years combined to account for 60% of all distributions during the quarter.
? All five meaningfully-sized sectors posted positive returns during the third quarter. Financial services businesses turned in the quarter’s best performance, 6.2% on the strength of investments made by funds from vintage years 2005 and 2007. The lowest return, 1.6%, was posted by companies in the manufacturing 5 Vintage year fund-level returns are net of fees, expenses, and carried interest.
? For the fourth consecutive quarter, consumer companies were the top recipients of invested capital, attracting about 37% of all dollars invested. This is about 14% more than the long-term average.? As indicated by the table to the right, China and India remained the largest regional components of the emerging markets index during the third quarter. By the end of the quarter, South Korea had reached the 5% of value threshold. India’s return was by far the best of the three countries.
? During the third quarter, companies in emerging Asia were the recipients of more than 76.0% of all capital invested, more than
16% higher than the long-term average.
? Based on market values at September 30, 2012, public companies comprised slightly less than 17.5% of the index, roughly the same as at the end of the prior quarter.
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