Characteristics of private equity return: evidence from Brazil

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Private equity (PE) stands out significantly in the world as one of the main development tools of the capital market in emerging economies and alternative sources of finance for companies. Particularly, the increase in fund value and continuous returns are objects of intense study in Brazil. The paper aims to find determinants to Brazilian private equity returns, regarding three relevant variables funds characteristics and GDP to a macroeconomic view. A sample of 1,112 PE funds registered at the Brazilian Securities and Exchange Commission (CVM) was used and analyzed by three main variables: period of establishment, equity size, and exclusivity as possible determinants of funds’ performance using multiple regression model and fourth variable GDP is applied as a descriptive variable. The results indicate that older funds had a return premium of 1.5% monthly over young funds, smaller funds had a return premium of 1.4% over larger funds, and exclusivity does not influence the funds’ performance. Thus, the paper provides a basis for the relevant factors that an investor should verify in Brazil’s private equity fund before allocating the resources.

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    • Figure 1. Comparison of the average return of FIPs and Brazilian GDP between 2004 and 2016
    • Figure 2. Exclusive funds distribution by interest period
    • Table 1. Hypotheses chart and references
    • Table 2. Groups for analysis
    • Table 3. Results of multiple linear regressions
    • Table 4. Performance of FIPs selected by their size in equity
    • Table 5. Performance of FIP according to their period of establishment
    • Table 6. Performance of exclusive and non-exclusive FIP funds
    • Table 7. Summary of the results chart
    • Conceptualization
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Data curation
      Carlos Coelho, Eduardo Contani
    • Formal Analysis
      Carlos Coelho, Federico Madkur
    • Investigation
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Methodology
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Project administration
      Carlos Coelho
    • Resources
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Software
      Carlos Coelho, Federico Madkur
    • Validation
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Visualization
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Writing – original draft
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Writing – review & editing
      Carlos Coelho, Eduardo Contani, Federico Madkur
    • Supervision
      Eduardo Contani, Federico Madkur