Over the last decade, private equity (PE) has become the largest segment in private markets, with assets under management reaching USD 7.6 trillion globally as of mid-2022. Half of this capital is now allocated outside of North America, marking a significant shift in the industry’s geographic footprint. Yet, academic research has disproportionately focused on North American markets due to limited international data availability.
In this study, I leverage a novel and comprehensive dataset combining fund-level data from Preqin and Eurekahedge to analyze the performance and persistence of private equity funds across international markets, including Europe, Asia-Pacific (APAC), and the Rest of the World (ROW), along with a set of globally diversified funds typically sponsored by North American firms. This research evaluates over 3,100 funds launched between 1980 and 2018, encompassing $4.2 trillion in capital commitments.
Executive Summary
Private equity (PE) has become a cornerstone of institutional portfolios, with global assets under management (AUM) reaching USD 7.6 trillion as of H1 2022, growing at a 14% CAGR since 2012. Despite the industry's growing global footprint, most empirical studies to date focus on North America. This research aims to address this imbalance by examining the performance and persistence of private equity funds across international markets—namely Europe, Asia-Pacific (APAC), Rest of the World (ROW), and globally diversified strategies.
Using a unique dataset merging Preqin and Eurekahedge fund-level data, this study evaluates 3,184 funds with USD 4.2 trillion in commitments raised between 1980 and 2018. We assess performance using internal rate of return (IRR), multiple on invested capital (MOIC), and public market equivalent (PME), benchmarked against regional and U.S. public indices.
1. Introduction
The globalization of private equity has reshaped capital allocation, with 50% of new investments in 2022 occurring outside North America. However, the empirical literature on international private equity has lagged, constrained by data limitations and inconsistent fund-level reporting. This study leverages newly harmonized fund-level cash flow data, sourced through FOIA and direct GP submissions, to deliver the most geographically comprehensive analysis to date.
Key research questions:
How does private equity performance vary across geographies and strategies?
Is there return persistence across global funds comparable to the U.S. market?
Do capital inflows influence subsequent returns, as theorized in the "money chasing deals" literature?
2. Data and Methodology
2.1 Data Construction
The dataset combines:
Preqin: 4,026 funds, focusing on large institutional investors and direct GP submissions.
Eurekahedge: 2,532 funds, including hedge/private equity hybrids and investor-initiated coverage.
After rigorous filtering (removing non-PE strategies, missing cash flows, and post-2018 vintages), we form a final sample of 3,184 unique funds and 1,305 distinct PE firms, totaling USD 4.26 trillion in committed capital.
2.2 Geographic Classification
Using MSCI’s regional taxonomy, funds are grouped into:
Europe (e.g., UK, Germany, France): 476 funds, USD 784B
Asia-Pacific (e.g., China, Japan, India): 256 funds, USD 310B
ROW (Africa, Latin America, Middle East): 94 funds, USD 46B
Global (non-specific geography, usually U.S.-sponsored): 191 funds, USD 561B
North America (U.S. & Canada): 2,167 funds, USD 2.56T (for benchmarking)
3. Performance Metrics
Three standardized performance metrics are used:
IRR: Annualized investor return net of management fees and carry.
MOIC: Total distributions + NAV divided by total contributions.
PME: Comparison to public equity benchmarks (e.g., S&P 500, MSCI Europe). A PME > 1 indicates outperformance.
NAVs are converted to USD, inflation-adjusted, and standardized using spot FX rates and CPI data from FRED and BLS.
4. Results: Fund Performance by Geography and Strategy
4.1 Buyout Funds
Buyouts dominate in both volume and capital.
Europe
IRR: 13.88%, MOIC: 1.39
Outperformed both MSCI Europe and S&P 500 (PME: 1.89 in 1990s)
Realization rate: 38%, suggesting maturing vintages and reliable NAVs
Asia-Pacific
IRR: 9.54%, MOIC: 1.32, PME: declining across vintages
Strongest vintages: 1990s (PME > 1.3), recent vintages underperform
ROW
IRR: 6.54%, MOIC: 1.25, PME: < 0.5 across benchmarks
Highest underperformance observed, both absolute and relative
Global Funds (U.S.-sponsored)
IRR: 15.69%, MOIC: 1.70
PME: consistently >1.8 (pre-2010), highest persistence in dataset
High geographical diversification mitigates inflow effects
North America (Benchmark)
IRR: 13.05%, MOIC: 1.50
PME: strong pre-2000s, declining in 2010s (PME: 0.59)
4.2 Growth Equity Funds
This strategy bridges VC and buyout, targeting late-stage private firms.
Asia-Pacific leads with IRRs of 12.4% and MOICs of 1.47
PME < 1, suggesting outperformance over dollar but not public benchmarks
Europe and ROW: lower IRRs (~9–10%) and PMEs (~0.6)
Global funds (largely U.S. based): IRRs ~8.3%, PME: ~0.7
4.3 Venture Capital Funds
Returns heavily concentrated in North American and global funds.
Global VCs: IRR 14.2%, PME > 1.1, strongest VC performance
Europe/APAC/ROW: IRRs between 7–10%, PMEs < 0.8
Reflects innovation ecosystem concentration in U.S. and fund maturity in non-U.S. VC markets
5. Return Persistence
Persistence is critical for fund selection and long-term asset allocation.
Findings
Europe and Global Buyouts: Strong persistence across vintages and quartiles
Growth Funds in Europe: Moderate persistence observed
Asia-Pacific and ROW: No meaningful persistence in any strategy
High persistence correlates with low manager turnover and market segmentation
6. The Impact of Capital Inflows
We test the “money chasing deals” hypothesis (Gompers & Lerner, 2000):
Europe: High inflows lead to return compression, mirroring North American dynamics
APAC and ROW: No measurable relationship between inflows and returns
Global Funds: Benefit from diversification, inflows do not depress performance
7. Discussion and Implications
For Investors
Geographic Differentiation is Critical: Europe and global buyouts offer stable alpha; growth equity in APAC offers selective opportunities.
Persistence Can Guide GP Selection: Prior top-quartile GPs in Europe and global strategies remain reliable.
Inflows Need Monitoring: In concentrated regions like Europe, vintage diversification is advised.
VC Remains U.S.-centric: Global and U.S.-sponsored VC funds outperform international peers.
For Fund Managers
Fund Strategy and Geography Shape Outcomes: Local GPs in APAC and Europe should tailor investment theses to regional dynamics.
Access Barriers Favor Incumbents: Top-tier GPs retain advantage, especially in segmented European markets.
8. Conclusion
Private equity is no longer a North American phenomenon. This study demonstrates that investment geography and strategy materially shape fund performance, persistence, and relative attractiveness. Europe and globally diversified buyouts are among the strongest performers globally, while APAC holds promise in growth equity. In contrast, venture capital success remains largely confined to U.S.-sponsored platforms.
Performance persistence is strongest where markets are segmented and GP access is limited, such as Europe and global strategies. These findings underscore the need for data-driven allocation, GP selection rigor, and regional specialization in building a successful international private equity portfolio.
Issued by: Finstock, Inc.
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