Preqin launches PE benchmarking tools

Private equity data specialist reports the launch of new benchmarking tools for the industry. It says its Public Market Equivalent (PME) tools provide directly comparable returns with public markets to allow for more meaningful, like-for-like performance comparisons.

Says Christopher Elvin – head of private equity products at Preqin: “Private equity returns are not directly comparable with public market indices, given the asset class’s illiquid nature and irregular timing of cash flows. As such, the industry has long used the analogy of comparing ‘apples with oranges’ when discussing these difficulties. Preqin is delighted to announce the addition of PME benchmarks and individual fund level PME comparisons to its Performance Analyst service, which already provides net-to-LP (limited partner) fund performance metrics for over 7,600 named vehicles globally. This will provide users, and particularly investors, with an essential tool for analysing private equity returns, specifically as an alternative measure of ranking fund performance while controlling for broader market behaviour.”

Preqin says its new tool offers benchmark and fund-level comparison against six public market indexes using a choice of three PME methodologies: the Kaplan- Schoar PME, the Long-Nickels PME, and the Capital Dynamics PME+. These tools overcome the benchmarking difficulties by accounting for the timings of fund cash flows in a public market index.