August 2019, Issue 1 - Editorial on nontraditional data sources for Israeli Investors
Extrapolating the "alternative Growth Factor" into the Private Equity market
The main idea is to use the broad coverage of the data and extrapolate the previously tested “growth factor” for public companies, derived from employment and pension contributions, and apply it to the private equity market. This will allow to gauge private companies' performance w.r.t. this factor and compare them with their publicly listed counterparts and/or the competition
Transforming growth factor into a z-score, i.e. (x-mean)/std.dev, and grouping private companies by the IRS sectors, one can observe that overall private companies have a "positive risk premium" with respect to this growth factor, with some exceptions in the Finance and Insurance, Information and Utilities sectors
Source: Deutsche Bank