The Potential of a Highly Correlated Index for Thematic Investing in Private Equity

Introduction

Thematic investing in private equity has become increasingly popular, and a recent document has shed light on the potential of a constructed index that closely aligns with private equity fund market returns. This article aims to explore the significance of this highly correlated index in thematic investing within the private equity space. The index demonstrates a remarkable correlation with commonly used private equity fund market indices, particularly the Burgiss LBO fund index. Furthermore, it exhibits similar returns to non-tradable Leveraged Buy-Out (LBO) fund indices. By comparing the constituents of this constructed index with the iShares Listed Private Equity ETF, we can identify differences that highlight the unique composition and potential of this index for thematic investing in private equity.

Correlation with Private Equity Fund Market Indices

The constructed index boasts an impressive correlation of nearly 90% with the Burgiss LBO fund index. This high correlation indicates that the index effectively captures the essence of private equity fund market performance. Such a strong correlation makes the constructed index an invaluable tool for investors looking to track and analyze private equity fund market returns.

Similar Returns to Non-Tradable LBO Fund Indices

The document also highlights that the constructed index exhibits similar returns to non-tradable Leveraged Buy-Out (LBO) fund indices. This finding further solidifies the index's credibility and potential as an investment tool for thematic investing in private equity. Investors can rely on the constructed index to provide comparable returns to non-tradable LBO fund indices, allowing them to make informed investment decisions.

Comparison to iShares Listed Private Equity ETF

When comparing the constituents of the constructed index to the iShares Listed Private Equity ETF, several differences emerge. Some companies are included in the constructed index but absent from the iShares Listed Private Equity ETF, and vice versa. This disparity in constituents underscores the unique composition of the constructed index and its potential to capture a broader range of relevant companies in the private equity industry. Investors seeking exposure to diverse private equity companies can benefit from the inclusion of these additional constituents in the constructed index.

Implications for Thematic Investing in Private Equity

The constructed index presents investors with a systematic and flexible approach to thematic investing in private equity. Its high correlation with private equity fund market indices, similar returns to non-tradable LBO fund indices, and differentiated constituents make it a valuable tool for investors seeking exposure to this asset class. The index can be utilized for hedging, strategic asset allocation, benchmarking, and as a liquid substitute for private equity investments.

Conclusion

The constructed index discussed in the document holds tremendous potential as a valuable tool for thematic investing in private equity. With its high correlation to commonly used private equity fund market indices, similar returns to non-tradable LBO fund indices, and differentiated constituents compared to the iShares Listed Private Equity ETF, the index offers investors a systematic and flexible approach to capturing the essence of private equity fund market returns. As thematic investing continues to gain traction, this index provides a valuable avenue for investors seeking exposure to the private equity industry. By leveraging the constructed index, investors can make well-informed decisions and navigate the complexities of the private equity market with confidence.