Join us on 6 March, 2025 at 9.30am GMT / 5.30pm SGT for our latest “Blitzinar”, a new event format bringing you key insights in 15 minutes + 15 minutes for direct Q&A, where we will discuss the following key takeaways from our latest report entitled “No Alpha Without Market Risk. What if private equity fund managers were just long-only active managers?”, which analyses 824 private equity funds (non-VC) across vintages from 2013 to 2023 to evaluate the presence of alpha across funds and the relationship between alpha and beta:

1. Alpha can only be achieved by taking on market risk. Unlike in listed markets, alpha cannot be separated from beta in private equities. There is no ‘short selling’ or derivatives market to augment positions or neutralise market exposure. This means that to generate alpha, a fund manager needs to take meaningful private equities’ market risk in pursuit of returns. Our analysis shows that private equity fund managers that generate alpha typically have betas to the private2000® index of at least 1.
2. Fund manager alpha should be evaluated against a private equities index such as the private2000 that reflects the underlying characteristics of the market. From this, one can evaluate how funds are performing against the relevant market, whether the manager has skill, or if most of their returns are determined by exposure to the market.
3. Our analysis shows that there is a small negative relationship between fund size and alpha. Despite disproportionate success in raising capital, the very large funds (on average) do not display any superior ability to deliver alpha..

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