From time to time, KKR publishes a long essay on various market perspectives. Unlike Howard Marks in his memos, the essays focus less on supertemporal truths and more on contemporary data, often presented within a historical perspective. While the essays are rather lengthy (even for my taste), some of the presented data is quite interesting.
In the recent one, "The End of the Beginning", two points especially caught my attention. The first is sector allocation within publicly- and privately-traded businesses. Unlike the U.S., where essentially all large corporations are publicly-traded, there are many countries in Asia where indices composed of publicly-traded equity securities are significantly overweight towards financials, with tech companies very under-represented. This is also somewhat true for Europe (See Exhibits 48 to 52 in the essay for the details.). This discrepancy probably explains a lot of overperformance that private equity achieved in Europe over the last 20 years (800% cumulative return vs. just 200% for MSCI Europe).
