Patent ID: 7421407

Claim:
A system for producing a quantitative value for, the risk of in a private investment portfolio relative to a public market, the correlation of the private investment portfolio to the public market and the excess return of the private investment portfolio over the public market comprising: (a) electronic means for determining an internal rate of return of the private investment portfolio; (b) electronic means for determining an index comparison return (ICM) for the private investment portfolio; (c) electronic means for determining a private investment characteristic line by plotting the values of (a) and (b) as points in a scatter plot with (a) on the y-axis and (b) on the x-axis and electronic means for applying least squares linear regression to the resulting plot to yield a linear equation in the form y=βx+α, where β is the slope of the regression line and α is the point at which the regression line crosses the y axis, and electronic means for determining a value for R 2 , the coefficient of determination; (d) electronic means for determining the correlation of the private investment portfolio with the public market by taking the square root of the coefficient of determination determined in (c) to yield the coefficient of correlation r; (e) electronic means for determining the risk (σ vc ) of the private investment portfolio by reference to the risk of the public market by solving the equation; β vc ⁢ σ S & ⁢ P 2 r VC , S & ⁢ P ⁢ σ S & ⁢ P = σ VC ; and (f) electronic means for determining the excess return of the private investment portfolio over the public markets by reference to the α of the linear regression line.