Private equity performance metrics (PE Metrics)

• Grant number: 14/50066-0
• Support Opportunities: Research Grants - Innovative Research in Small Business - PIPE
• Start date: October 01, 2014
• End date: November 30, 2017
• Field of knowledge: Applied Social Sciences - Administration - Business Administration
• Agreement: FINEP - PIPE/PAPPE Grant
• Principal Investigator: Leonardo de Lima Ribeiro
• Grantee: Leonardo de Lima Ribeiro
• Company: Pebay Informação de Investimentos Eireli - ME
• City: São Paulo

Abstract

It is estimated that more than R$ 80 billion was invested in private equity and venture capital in Brazil (ABVCAP 2013). But the performance of these investments, no one knows. This is the Achilles heel of this importer segment of the capital market. But not only in Brazil. According to Harris, Jenkinson and Kaplan (2013), history performance of private equity (PE) remains uncertain, if not controversial. While several commercial enterprises performance data, they do not obtain information for all funds; they often do not disclose, or even collect, fund cash flows; and the source of the data is sometimes obscure". While there are approximately six international databases, none of them possesses adequate coverage of the Brazilian market, where industry regulation sets out certain requirements relating to disclosure of information and tax benefits in the use of local fund structures. This makes assembling a database on returns with public data, as well as performing research on the actual performance of the industry, a viable task. Several studies on the sector have been conducted in Brazil in the last 10 years, with highlights to the first census produced within the Center for the Study of Private Equity and Venture Capital at Fundação Getúlio Vargas (GVcepe), whose results were published by Carvalho, Ribeiro and Furtado (2006) and Ribeiro, Carvalho and Furtado (2008). A recent update in census (ABDI, 2012) brings detailed explanation of the difficulties of obtaining performance data in Brazil. By using a new technique for obtaining audited financial reports of funds (both living or closed) and application of a new algorithm that uses data obtained from various sources to classify funds, identify the manager of fact and consolidate funds that are part of the same investment program, we obtain an unprecedented, up-to-date, unbiased, reliable and complete data-base that boasts performance of funds and private equity transactions year-by-year. Once completed, these results will be invaluable for those who invest in the sector, to a better decision-making and comparison of performance. Managers will be able to benchmark against their peers. It will also offer researchers around the world the opportunity to work with a novel data set, generating state-of-the-art research with real impact on the economy. (AU)