US PE’s Outperformance of European PE Is Structural, Not Operational

It’s not that US firms are better operators – there are a number of structural reasons for the performance gap between European buyouts and their American counterparts.

According to Fabien Chen, head of benchmarks at Preqin, North American buyouts have outperformed European buyouts since June 2009. Based on Preqin’s buyout index, North American PE has delivered 806% returns net of fees, while European PE has returned 697%.

Given Europeans’ reputation for strict labor laws and love of vacation time, alongside their abundance of red tape, it’s tempting to blame operational frictions as the cause of this underperformance. However, according to Chen’s colleague Victoria Chernykh, an assistant vice president of research insights at Preqin, the blame is more due to the structural differences in North American and European PE markets.