After months of lacklustre share prices, listed private equity is staging a recovery that is leaving comparable financial stocks wanting, according to Swedish bank SEB.
Shares in quoted private equity historically followed equity indices and financial stocks but started going through a decoupling at the beginning of the year.
Listed private equity index the LPX50 – which tracks the 50 biggest private equity companies including SVG Capital and HgCapital – used to move in line with financial shares, but started falling behind in January.
SEB attributes this lag to an uncertain funding outlook and the difficulty in assessing the deal pipeline ahead.
But since the first quarter financial shares, represented by the S&P Finance index, have begun falling behind private equity as it returns to health.
This is thought to be because net asset values have held firm, rising 17 per cent since the new year. Even with portfolios showing their mettle, concerns over debt as the sovereign crisis persisted kept investors away from listed private equity.
Since April, however, demand for the LPX50 index has grown as investors have become hip to the NAV growth.
More than that, firms have made a bigger effort to educate investors about the asset class, have launched share buybacks, increased dividends and begun consolidating, putting the LPX50 ahead of the S&P Finance.