Unicorn indexes for private equity launch

By Penny Pryor

Morningstar has launched a series of indexes that will track late-stage venture-backed companies, or unicorns.

The Pitchbook Global Unicorn Index suite includes global indices, United States indexes and Europe and Asian indices.

There are six Australian companies represented in the global index, but Australia does not have its own index. The companies included are: Canva, Airwallex, Immutable, SafetyCulture, GO1 and Linktree.

Morningstar Indexes head of innovation, Sanjay Arya, says the indexes were launched in response to market feedback from large institutional investors for more consistency around how private market performance is measured.

"So, we've talked to a bunch of people, and we've looked at a bunch of studies people have done too. It's been all over the place. [Sometimes] people take their own benchmarks and that's a bit self-serving in a way," he says.

In Australia, the benchmarks may be useful for superannuation funds that invest in private equity, which are generally the largest investors in this asset class locally.

"We're really trying to go out to market to say, hey, we have these indexes, we're first to market with this type of index. And we're certainly hoping, especially with the performance test that's occurring in superannuation funds, that this will be an index that we're approached about for that exact reason," Morningstar senior product manager indexes, Elle Kuhta, said.

The definition of unicorn for the purposes of the indices is the industry accepted definition of a venture-backed company that has reached a valuation of $1 billion.

"You know, this term was coined by somebody in 2004. And that's when unicorns were really rare. Just like the mythical creature you didn't have too many of these, there were 30 or 40, just a handful of those. Today, there's about 1300 in there. When you look at the size of the market, it's between $US4 and $US5 trillion," Arya said.