PT - JOURNAL ARTICLE AU - Andreas Gruener AU - Leon Marburger TI - New Insights into Private Equity: Empirical Evidence from More Than 500 Buyouts AID - 10.3905/jpm.2022.1.400 DP - 2022 Jul 22 TA - The Journal of Portfolio Management PG - jpm.2022.1.400 4099 - https://pm-research.com/content/early/2022/07/21/jpm.2022.1.400.short 4100 - https://pm-research.com/content/early/2022/07/21/jpm.2022.1.400.full AB - This article investigates the performance of private equity–backed companies in the last 15 years and attempts to shed light on an industry in which data are scarce. Despite vivid debate about its actual performance, private equity investing has been attracting enormous amounts of capital in recent years. Research has mixed findings, but it often is biased and conducted by those close to the industry. The authors obtained data on approximately 500 buyouts between 2007 and 2018 from a limited partner and studied this proprietary and unique set of financial data to assess actual returns and examine the drivers of returns. They find that buyouts have outperformed public equities on a gross basis over the past 15 years significantly; money invested in private equity has increased fivefold while investments in the MSCI World or SP 500 Index have only increased threefold. From 2006 to 2018, private equity yielded 13% a year (CAGR), while the average annualized return has been 8% for the SP 500 and 6% for the MSCI World. While this finding supports previous research, the outperformance of private equity in fact is more severe, explaining the tremendous interest by investors in private equity. The authors conclude that industry specialization leads to higher returns and can partially support Jensen’s (1986) theory of the firm, while no significant relationship between geographic specialization and performance can be found. Additionally, they found that active involvement of a fund correlates with higher performance—the more assets a fund has under management, the lower the performance of the buyout. Experience really matters, and there is no one-solution-fits-all approach.