Taking the Private out of Private Equity, with the Morningstar PitchBook Buyout Replication Index

Morningstar

Sanjay Arya, Andrew Akers

Research

17 Pages

Morningstar and PitchBook introduce the Buyout Replication Index, a public equity portfolio designed to emulate the risk-return profile of private equity buyout funds. By analyzing take-private transactions, financial statements, and stock price data, the index replicates key characteristics of buyout strategies, including sector allocation and leverage. This approach offers investors a transparent and liquid benchmark to assess private equity performance.

Key Takeaways

Comparable performance achieved: From 2014 to 2024, the Buyout Replication Index outperformed the Morningstar US Small Cap Extended Index by 6.1% annually.
Sector biases identified: Buyout portfolios tend to underweight financial services by 15.2% and overweight information technology by 13.8%.
Enhanced benchmarking tool: The index provides a more accurate benchmark for evaluating buyout fund performance compared to traditional public equity indexes.
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