No. In recent years, many private investment fund managers have painted themselves with a growth equity brush. Limited partners need to be increasingly diligent to determine if they are accessing the truly differentiated and attractive investment profile offered by actual growth equity.
In 2022, the Cambridge Associates LLC Developed Markets ex US Private Equity and Venture Capital Index returned -11.1% in USD terms, marking a sharp reversal from two strong years in 2020 and 2021. Performing slightly better than its developed markets counterpart, the Cambridge Associates LLC Emerging Markets Private Equity and Venture Capital Index returned -8.1% for the year in USD terms, but it also suffered a substantial reversal from strong performance in recent years.
A year after posting their second highest annual returns ever, performance for the US private equity and venture capital indexes fell back to earth in 2022.
Our annual analysis comparing private equity globally with public peers.
This analysis includes our observations on key metrics by which private equity managers execute their strategy.
In first half 2022, US private equity and venture capital broke their trend of sustained positive performance as the downturn in the public markets spilled over to privates.
According to Cambridge Associates indexes, private equity and venture capital in the developed markets underperformed those in emerging markets in first half 2022.
We expect the cyclical backdrop to impact private equity and venture capital returns, ultimately influencing recently invested vintages the most. That said, we think the 2023 vintage could perform well.
Reflecting on the last ten years of analyses, we have seen the industry continue to evolve, from Private Equity 1.0 to 2.0, marked by increased sophistication in every aspect of finding, analyzing, and operating companies. With this evolution, private equity has also grown in importance and delivered strong absolute and relative returns. Our analyses have highlighted four key themes: private equity outperformed public markets, the tech sector was a clear winner, top-line growth was a driver of superior returns, and small-cap companies continue to demonstrate promise.
In 2021, the Cambridge Associates LLC Developed Markets (ex US) Private Equity and Venture Capital (PE/ VC) Index returned 33.4% in USD terms, equaling its strong performance in 2020.