BOSTON, MA--(Marketwired - Aug 18, 2014) - Private equity and venture capital funds that invest primarily in global ex US developed markets, and those that focus their investments in emerging markets, enjoyed double-digit growth in 2013 and positive returns in the year's final quarter, as measured in US dollars. Q4 returns for the developed markets index benefited from a strengthening Euro in the last four months of the year, according to Cambridge Associates LLC (CA).
The Cambridge Associates LLC Global ex US Developed Markets Private Equity and Venture Capital Index returned 6.5% for the quarter ending December 31, 2013, maintaining its string of positive quarters for the year. During the same period, the index's public market counterpart, the MSCI EAFE, returned 5.7%. For the year, the global developed markets index rose 16.3%, which lagged the MSCI EAFE's more robust 22.8%.
The Cambridge Associates LLC Emerging Markets Private Equity and Venture Capital Index outperformed the global developed markets index for the quarter, but not for the year, rising 7.3% and 13.6% over these periods, respectively. These gains, however, were significantly greater than the emerging markets index's public counterpart, the MSCI Emerging Markets index, which managed only a 1.9% increase for the quarter but fell back 2.3% for the year. The performance of both CA benchmarks versus comparable public market indices over various time horizons ending on December 31, 2013 is shown below.
Percentage Returns for the CA Global ex US Developed and Emerging Markets PE/VC
Indexes vs Public Counterparts for Periods ending December 31, 2013
| Qtr. | 1 Year |
3 Years |
5 Years |
10 Years |
15 Years |
20 Years |
||||||||
| CA Global ex US Dev Mkts PE/VC | 6.5 | 16.3 | 10.9 | 13.0 | 13.8 | 13.8 | 14.2 | |||||||
| CA Emerging Markets PE/VC | 7.3 | 13.6 | 7.2 | 14.6 | 12.5 | 8.9 | 8.3 | |||||||
| MSCI EAFE | 5.7 | 22.8 | 8.2 | 12.4 | 6.9 | 4.5 | 5.7 | |||||||
| MSCI Emerging Markets | 1.9 | -2.3 | -1.7 | 15.1 | 11.5 | 11.2 | 5.7 | |||||||
| S&P 500 | 10.5 | 32.4 | 16.2 | 17.9 | 7.4 | 4.7 | 9.2 | |||||||
Sources: Cambridge Associates LLC, MSCI Inc., Standard & Poor's, and Thomson Reuters Datastream. MSCI data provided "as is" without any express or implied warranties.
Based on December 31, 2013 market values, public companies accounted for about 15.6% of the developed markets index and 18.8% of the emerging markets index. Both percentages were down from end of year 2012, when they were 19.1% and 22.4%, respectively.
Select Results from the ex US Developed Markets and the Emerging Markets Indices
Annual Returns for Top four Vintages in the Developed Markets Index, and Five of the Top Six Vintages in the Emerging Markets Index, Were All in Double Digits
At year's end, the four largest vintages in the developed markets index were vintage years 2005-2008; together, they represented just over three-fourths of the benchmark's value. All four had positive returns for Q4 and for the year, with gains for the latter all in double digits. The largest vintage, funds raised in 2006, gained 6.4% for the quarter and 19.2% for the year. The 2008 vintage funds turned in the best performance of the four largest vintages for both the quarter and the year, earning 7.8% and 21.4%, respectively, for these periods. The 2005 vintage year funds had the lowest return for the group over the same periods: 5.6% and 11.0%.
Six vintage years in the emerging markets index were large enough to be significantly sized, accounting for at least 5.0% of the index: vintages 2005-2008, 2010, and 2011. All had positive returns for both Q4 and 2013, and with the exception of the funds raised in 2005, all had annual returns in double digits. The top performers were the 2011 funds, for the quarter, and the 2008 funds for the year, rising 12.0% and 19.2%, respectively, over those periods. The largest vintage year, the 2007 funds, accounted for almost 35% of the emerging markets index; they returned 6.7% for the quarter and 12.5% for the year. The 2005 funds had the lowest quarterly and annual returns of the group: 4.7% and 5.2%, respectively.
Media was the Dominant Sector for the Quarter and Year in the Developed Markets Index; in the Emerging Markets Index, IT and Healthcare Led the Way
A total of seven sectors in the developed markets index were significantly sized at the end of 2013, and all of them had double-digit gains for the year. Media topped the list with a 42.7% annual rise, followed by IT, which gained 30.9%. Media was also the best performing sector in the final quarter, rising 16.9%, followed by IT's 11.7% gain. Energy had the lowest Q4 and 2013 return of the top sectors, gaining 4.4% and 13.0%, respectively.
The three largest sectors -- consumer, healthcare, and IT -- represented nearly half of the developed markets index's value and, on a dollar-weighted basis, returned 21.2% for the year.
The emerging markets benchmark was somewhat more tightly concentrated by sector, with only five sectors large enough to be considered significantly sized. Of these five, three -- healthcare, IT, and manufacturing -- had double-digit returns for both the fourth quarter and the year. IT led the way in Q4 with a 17.1% rise, while healthcare posted an extremely robust annual return of 51.0%. The lowest returns among the top five sectors were earned, for the quarter and year, respectively, by consumer and financial services: 5.6% and 9.8%. Interestingly, financial services' 9.8% gain in Q4 equaled its entire gain for 2013.
Capital Distributions were Higher than Contributions for the Third Consecutive Year in the Developed Markets Index
Capital calls were down and distributions were up for both the quarter and the year in the developed markets index. Fund managers in the index called $7.1 billion in Q4, down almost 4% from the previous quarter, and they distributed almost $19.2 billion -- a sharp 29.3% rise over Q3. Investors in funds launched in 2004-2008 received more than 85% of the capital returns during the quarter.
For the year, contributions fell by 24.3% from 2012, while returns rose 29.6%. 2013 was the third consecutive year in which distributions outnumbered contributions.
In the Emerging Markets Index, Year-long Distributions Outnumbered Contributions for the First Time Since 2005
"Fourth quarter calls and distributions were both up in the emerging markets index. Limited partners of funds in the benchmark contributed $4.4 billion in Q4, an almost 10% rise over Q3, and they received $3.4 billion in distributions, a roughly 14% increase. Investors in just two vintage years, 2005 and 2007, received more than half of all of the quarter's distributions," said Andrea Auerbach, Managing Director and Head of Global Private Investment Research at Cambridge Associates.
"Unlike the quarter, for the year, calls in the emerging markets benchmark were down, dropping about $2.3 billion from 2012 to about $14 billion. Distributions for the year, however, were up dramatically. Limited partners in the index received $14.3 billion in 2013, a 72% increase over 2012. 2013 was in fact the first year since 2005 in which distributions outpaced contributions," she added.
Regional Returns were Highest in Germany for the Quarter and the US for the Year in the Developed Markets Index
Of the five significantly sized regions in the developed markets benchmark, four are located in Western Europe: France, Germany, Sweden, and the UK The sole geographical outlier of the top five regions was the US (While funds in the developed markets index invest primarily in Europe, they do occasionally invest in US-based businesses; hence its inclusion in the benchmark.) All had positive returns for the fourth quarter and for the year, with returns for the latter all in double digits.
Germany led all regions for the quarter, with portfolio companies based there returning 11.7% for the period. Portfolio companies based in the US did best for the year, earning 24.5%. France had the poorest performance among the meaningfully sized regions for the second year in a row: 13.3%.
In the Emerging Markets Benchmark, China was the Leading Region for Both Periods
The emerging markets index remained tightly concentrated geographically, with only three regions being meaningfully sized: India, Mainland China, and South Korea. Of the three, China comprised almost 37% of the benchmark's value. Portfolio companies based there led the way for both the quarter and the year, returning 16.0% and 31.6%, respectively. South Korea was the second best performer for both periods. India was the only country and region of the three to post a negative return for the year: -2.0%.
For more details and analysis of the Q4 and 2013 performance of the Cambridge Associates LLC Global ex US Developed Markets Private Equity and Venture Capital Index and the Cambridge Associates LLC Emerging Markets Private Equity and Venture Capital Index, please go to http://www.cambridgeassociates.com/our-insights/research/global-ex-us-pevc-benchmark-commentary/.
About the Indices
Cambridge Associates derives its Global ex U.S. Developed Markets Private Equity and Venture Capital Index from the financial information contained in its proprietary database of global ex U.S. private equity and venture capital funds. As of June 30, 2013, the database included 721 global ex U.S. developed markets private equity and venture capital funds formed from 1986 to 2013 with a value of about $265 billion. Ten years ago, as of June 30, 2003, the benchmark index included 337 global ex-US developed markets funds, whose value was roughly $51 billion.
Cambridge Associates derives its Emerging Markets Private Equity and Venture Capital benchmark from the financial information contained in its proprietary database of global ex U.S. private equity and venture capital funds. As of June 30, 2013, the database comprised 445 emerging markets funds formed from 1986 to 2013 with a value of about $105 billion. Ten years ago, as of June 30, 2003, the benchmark index included 158 emerging markets funds, whose value was slightly less than $13 billion.
About Cambridge Associates
Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Today the firm serves over 950 global investors and delivers a range of services, including investment advisory, outsourced investment solutions, research and tools (Research Navigator and Benchmark Calculator), and performance monitoring, across asset classes. The firm compiles the performance results for over 5,400 private partnerships and their more than 68,000 portfolio company investments to publish proprietary private investments benchmarks. Cambridge Associates has more than 1,100 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, CA; London; Singapore; Sydney; and Beijing. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control. For more information about Cambridge Associates, please visit www.cambridgeassociates.com.
Cambridge Associates has been selected to provide data and to develop and maintain customized industry benchmarks for a number of prominent industry associations, including the Institutional Limited Partners Association (ILPA), Australian Private Equity & Venture Capital Association Limited (AVCAL); the African Venture Capital Association (AVCA); the Hong Kong Venture Capital and Private Equity Association (HKVCA); the Indian Private Equity and Venture Capital Association (IVCA); the New Zealand Private Equity & Venture Capital Association Inc. (NZVCA); the Asia Pacific Real Estate Association (APREA); and the National Venture Capital Association (NVCA). Cambridge also provides data and analysis to the Emerging Markets Private Equity Association (EMPEA).
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