1.2 Country Weights

For the selected list of countries, we determine the weight of each country to ensure the representativeness of the index to capture aggregate private market performance. This begins with mapping out the relative size of private markets in each country.

We use the gross domestic product (GDP) of the highly-ranked countries by PE/VC Investment Attractiveness (i.e., top 30 countries) selected for the privateMetrics® Market Indices based on International Monetary Fund (IMF) data. Beginning with the annual nominal GDP values, we perform some adjustments to make the value representative of private markets. The adjustments include:

• Adjusting the GDP measure to remove the public sector component (i.e., the government).

• Penalising the GDP measure to reflect investment restrictions on foreign investors imposed in the country.

To arrive at the appropriate penalty, we use the Organisation for Economic Co-operation and Development’s FDI restrictiveness index (OECD, 2024). The index measures statutory restrictions on foreign direct investment, i.e., FDI across 69 countries and sectors. We penalise countries that have an above-average FDI restrictiveness for their time.

The proposed country weights derived by the described approach are provided in the figure below from 2013 to 2022 for the top 30 countries. The United States consistently receives the maximum weight, reaching a high of 45.9% in 2022, followed by Japan, whose weight over the period has decreased from 15.6% to 7.2%. The top two countries are followed by Germany, the United Kingdom, and France, constituting the top 5 countries by weight.

Note that since index computations are performed in 2023, the lagged yearly weights are used to ensure data availability at the time of computation. The proposed methodology for weight computations will be updated as new information becomes available and as private markets evolve periodically.

_{OECD (2024). FDI Restrictiveness. Organisation for Economic Co-operation and Development. Accessed July 12, 2024. https://www.oecd.org/en/data/indicators/fdi-restrictiveness.html}