Buyout Performance with Assets Valued at Marrket

Abstract

The debate over whether buyout investments generate positive alpha hinges on proper risk measurement. We study buyout volatility, valuation, and performance through the lens of public-market pricing of private equity interests on European stock exchanges. We report that the volatility and stock market correlation of listed private equity (LPE) returns are greater than when determined using cash flows and net asset values (NAVs). We estimate a beta of roughly 1.5 and find no statistically meaningful alpha. Using market-priced buyout vehicles eliminates the appearance of alpha generated by smoothed NAVs and implies standard equity‑like compensation for higher leverage. These results align with those of studies based on secondary market transactions.