What do the statistics on private equity really tell us?
What do private equity figures really tell us? The question is less straightforward than it might seem. Not because the available statistics are unreliable, but because it has become increasingly important to understand exactly what scope they cover.
When discussing trends in private equity, attention inevitably focuses on capital raised, investments made, the number of transactions and divestments. These figures are certainly important, but they must be interpreted in the light of two key factors: what we mean by private equity and the instruments used to invest in it.
This first point is significant in its own right. Official statistics, in fact, group together a wide range of very different investment categories under the definition of ‘private equity’: venture capital, growth or development capital, buyouts and turnarounds. These activities are united by their investment in the risk capital of unlisted companies, but are characterised by often very different scales, risk profiles, financial requirements and market dynamics.
A slowdown in buyouts, for example, does not necessarily imply a similar trend in venture capital or growth capital, and vice versa. The aggregate figure may therefore mask very different dynamics within the individual market segments. But there is a second aspect, which is perhaps even less frequently considered.
The available statistics relate mainly to the activities of private equity funds. This is an instrument that has historically represented, and continues to represent, a key component of the sector, but which can no longer be regarded as synonymous with the market as a whole.
