Carlyle, Blackstone and Private Markets’ Beta

In the last few days, Carlyle first and Blackstone almost right after released investor updates and provided interesting information about the growth estimates of the value of their private equity funds for 2013 and the first quarter of 2014.

For buyouts, Carlyle released the growth numbers that were respectively 8% for the first quarter and 27% for the last twelve months. As the first quarter 2013 growth reported by Carlyle was 9%, the estimated number for 2013 is therefore 28% = 27% – 8% + 9% (compounding neglected here).

For private equity funds, Blackstone has released growth numbers that are respectively 7% for the first quarter and 27% for the last twelve months. Using the adjustment as above, because the number for the first quarter 2013 was 7,9% the estimated growth for 2013 is 27,9%.

Interestingly, these data are quite similar – for all that has been written in the previous posts, I am obviously not surprised. Less obvious, but with similarly grounded expectations, was the result of the first comparison of these data with our private capital beta estimates recently published.

The table below compares our private capital beta estimates and Carlyle and Blackstone data.

pcB into context

Carlyle and Blackstone’s figures for 2013 fall almost in the middle of our σ =1 (20,7% – 32,3%) estimated range, very close to our private capital beta growth estimates. Their figures for the first quarter are respectively slightly outside and just inside our σ =1 (1,7% – 7,5%) estimated range.

Immagine1

It is worth noting that certain differences were to be expected due to the different calculation methodologies and assumptions used by us (unlevered duration adjusted returns on capital, net of charged fees) and by Carlyle and Blackstone (ending remaining investment fair market value plus net investment outflow – sales proceeds minus net purchases – minus beginning remaining investment fair market value divided by beginning remaining investment fair market value, possibly gross of fees).

Still, from an investor’s risk management and pricing perspective, what is important is that these figures are predictable with reasonable precision. And so it seems.

 

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