New Study Shows Diverse Private Equity Managers Beat Performance Benchmarks, Again!

New Study Shows Diverse Private Equity Managers Beat Performance Benchmarks, Again!

WASHINGTON – November 1, 2021: Diverse-owned private equity firms continue to outperform their benchmarks, according to “Examining the Returns 2021: The Financial Returns of Diverse Private Equity Firms,”a study released today by the National Association of Investment Companies (NAIC). When combined with findings previously reported in NAIC’s 2019 and 2017 studies, these results confirm a long history of benchmark-beating performance by diverse investment managers.

Authored by Meredith Jones, Partner, Global Head of ESG for Aon, the biennial report is the industry’s only quantitative study measuring the performance of diverse-owned private equity firms against established benchmarks. The report illustrates diverse managers’ acumen in sourcing deals and executing their investment strategies, even during uncertain economic conditions. It is also a critical tool used in NAIC’s ongoing efforts to increase capital allocations to diverse-owned alternative investment firms, who continue to manage just 1.3 percent of the industry’s $69 trillion in assets.  This troubling statistic continues in the face of a growing number of conversations regarding diversity and inclusion within the industry and a history of outperformance by diverse firms. Still, many institutional investors continue to overlook these accomplished investment managers.

Among the report’s findings are:

  • Diverse private equity funds, represented by the NAIC Private Equity Index, outpaced the Burgiss median for net Internal Rate of Return (IRR), Multiple on Invested Capital (MOIC) and Distribution to Paid-In (DPI).
  • The NAIC Private Equity Index produced higher net IRRs than the Burgiss Median Quartile in 76.5 percent of the vintage years studied. Roughly 40 percent of the funds in the Index produced top quartile net IRRs and MOICs during the period, while approximately 30 percent of the funds produced top-quartile DPIs.
  • The NAIC Private Equity Index outperformed the Burgiss median in 85.7 percent of the periods measured. On a total period basis, the NAIC Private Equity Index posted a 0.64x DPI to the Burgiss median’s 0.4x.

“The NAIC Private Equity Index has consistently surpassed its benchmarks – even during tumultuous times such as the world experienced last year,”says Robert L. Greene, NAIC’s President & CEO. “We hope that quantifiable data verified by respected global firms like Aon, combined with more inclusive practices by capital allocators, will result in measurable progress for talented diverse professionals who are delivering outsized returns.”

The full report is available on NAIC’s website: https://naicpe.com/wp-content/uploads/reports/NAIC2021-ExaminingTheResults.pdf

About National Association of Investment Companies

Celebrating 50 years of advocacy and performance, the Washington, D.C.-based National Association of Investment Companies (www.naicpe.com) is the trade association and largest network of diverse- and women-owned private equity firms and hedge funds. NAIC’s membership comprises more than 135 firms that collectively manage over $250 billion in institutional assets.

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Alan Hughes