Recession bolsters PE returns

The study found that, in a stable market environment private equity funds generate alpha at around 12% whereas during a recession alpha increases to 18%. By contrast, during a moderate growth phase private equity investments generate alpha of just 2%. This deteriorates even further during a booming economy, with negative alpha of 7%.

Furthermore the study found that fund manager experience is the main driver for generating returns above that of the stock market. According to the findings, private equity investments by established fund managers realise excess returns of 5% on average.

The study was based on Golding Capital Partner's data base and carried out together with the HEC School of Management.

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