Performance Of Private Equity Funds Research Articles

The Impact of Leadership Diversity on Private Equity Fund Performance

The Impact of Leadership Diversity on Private Equity Fund Performance

Limited Partners versus Unlimited Machines; Artificial Intelligence and the Performance of Private Equity Funds

Limited Partners versus Unlimited Machines; Artificial Intelligence and the Performance of Private Equity Funds

The Impact of Leadership Diversity on Private Equity Fund Performance

The Impact of Leadership Diversity on Private Equity Fund Performance

Performance of Private Equity Funds in Korea

This study analyzes performance of PEFs in Korea. Using the unique return data of 134 private equity funds collected from limited partners (LP) including pension funds, this study explores performance differences by investment step, strategy, timing, and fund size. This study also investigates risk adjusted return, return on economic cycles, and likelihood of performance exaggeration by general partners (GP) on liquidated funds. In addition, this paper examines factors to affect PEF performance. We find that Korean PEF records 6.12% of IRR and 1.22 of investment multiple on average. Fund performance is also found to be superior in liquidated funds by investment step, buyout funds by investment strategy, and small funds by fund size. As the result of analyzing performance of only liquidated funds, reflecting the nature of private equity funds where most of the profits are realized at the time of harvesting, we find that risk adjusted returns by measuring KS-PME, PME+, and direct alpha overperform market returns, and that funds liquidated during the recession display higher returns than funds liquidated during the boom. In terms of factors affecting performance, fund performance is negatively related to fund life, market return, and GDP growth rate.

Financial crisis and private equity performance in France

This study aims at analysing the performance of the private equity industry in France taking into account the financial subprime crisis. Based on a sample of 339 private equity funds, the results show that the financial crisis negatively and significantly impacted the performance of private equity funds. Development capital funds and buy-out funds experienced a significant decline in their performance after the crisis. Results show a better resilience of small funds in comparison to larger ones. The bigger funds suffered from a severe drop in their performance after the beginning of the financial crisis.

Financial crisis and private equity performance in France

This study aims at analysing the performance of the private equity industry in France taking into account the financial subprime crisis. Based on a sample of 339 private equity funds, the results show that the financial crisis negatively and significantly impacted the performance of private equity funds. Development capital funds and buy-out funds experienced a significant decline in their performance after the crisis. Results show a better resilience of small funds in comparison to larger ones. The bigger funds suffered from a severe drop in their performance after the beginning of the financial crisis.

Paying for Performance in Private Equity: Evidence from Venture Capital Partnerships

We offer the first empirical analysis connecting the timing of general partner (GP) compensation to private equity fund performance. Using detailed information on limited partnership agreements between private equity limited and general partners, we find that “GP-friendly” contracts—agreements that pay general partners on a deal-by-deal basis instead of withholding carried interest until a benchmark return has been earned—are associated with higher returns, both gross and net of fees. This is robust to measures of performance persistence, time period effects, and other contract terms and is related to exit-timing incentives. Timing practices balance GP incentives against limited partner downside protection. This paper was accepted by Gustavo Manso, finance.

The Private Equity Return Gap

Private equity firms have discretion over the timing of their funds' capital calls and distributions, making the popular internal rate of return (IRR) an incomplete measure of private equity fund performance. Do investors avoid the textbook pitfalls of the IRR when cash flow timing is partly endogenous? In a comprehensive sample of 6,945 funds, the authors find that more than half of the funds' IRR is attributable to timing, with substantial variation. The timing component persists across a private equity firm's funds and facilitates fundraising.

Paying for Performance in Private Equity: Evidence from VC Partnerships

We offer the first empirical analysis connecting the timing of general partner (GP) compensation to private equity fund performance. Using detailed information on limited partnership agreements between private equity limited and general partners, we find that GP-friendly contracts - agreements that pay general partners on a deal-by-deal basis instead of withholding carried interest until a benchmark return has been earned - are associated with higher returns, both gross and net of fees. This is robust to measures of performance persistence, time period effects, and other contract terms, and is related to exit-timing incentives. Timing practices balance GP incentives against limited partner downside protection.

Equilibrium Asset Prices and Manager's Contracts: An Application to Private Equity Fund

In this paper, I examine the joint determination of the contract for a private equity (PE) fund manager and the equilibrium risk premium of the PE fund. My model relies on two realistic features of PE funds. First, I model agency frictions between PE fund's investors and manager. Second, I model the illiquidity of PE fund investments. To alleviate agency frictions, compensation to the manager becomes sensitive to the PE fund performance, which makes investors excessively demand the PE fund to match the target exposure to a PE fund specific risk. This induces a negative effect on the risk premium in equilibrium. For the second feature, I add search frictions in the secondary market for PE fund's shares. PE fund returns also contain a positive illiquidity premium since investors internalize the possibility of holding sub-optimal positions in the PE fund. Thus, my model delivers a plausible explanation for the inconclusive findings of the empirical literature regarding PE funds' performance. Agency conflicts deliver a lower risk-adjusted performance of PE funds, while illiquidity risk can raise it.

Private Equity Performance: A Literature Review

In this article, we review the literature on the performance of private equity funds, venture capital funds, fund of funds, buyouts, and reverse buyout funds. We also examine the factors driving performance persistence in private equity funds and in buyout funds. Finally, we describe recent findings on the factors driving private equity returns and review the recent literature related to performance assessment of private equity funds.

Эффективность фондов прямых инвестиций на развивающихся рынках

Степан Александрович Гусамов - Национальный Исследовательский Университет "Высшая школа экономики". 
 Электронная почта: iastepanov@hse.ru
 Иван Иванович Родионов - Национальный Исследовательский Университет "Высшая школа экономики". 
 Электронная почта: irodionov@hse.ru
 Из-за отсутствия данных о денежных потоках, оценить эффективность ФПИ для развивающихся рынков капитала представляется более сложной задачей, чем для развитых, так как использование традиционных показателей доходности TVPI и IRR невозможно.В данном исследовании был предложен подход, предполагающий применение скорректированных показателей доходности для ФПИ, который может быть реализован без использования данных о денежных потоках и чистых активов фондов. Предложенные показатели могут быть рассчитаны на основе имеющихся в публичном доступе данных о портфельных сделках фондов.В исследовании была представлена методология анализа эффективности ФПИ на основе портфельных сделок, а также проведен анализ эмпирических данных на выборке из 1957 сделок стран BRIC в период с 2000 по 2012.Результаты эмпирического анализа в целом подтверждают ряд фундаментальных характеристик ФПИ, ранее выявленных для развитых рынков капитала таких как:1. Сделки ФПИ в развивающихся странах являются более рисковыми активами, чем традиционные инструменты.2. Доходность у большинства сделок ниже доходности фондового рынка, однако, наиболее успешные существенно опережают рынок.3. Инвестиции фондов выкупа имеют коэффициент β меньше единицы, что говорит о малой подверженности системному риску.Некоторые характеристики нашли подтверждение только частично:1. Инвестиции венчурных фондов имеют коэффициент β больше единицы для рынков Бразилии и Индии, и меньше единицы для России и Китая.2. Доходность инвестиций BO фондов выше доходности VC фондов в России и Китае. В Индии и Бразилии – результат обратный.Оставшаяся часть характеристик принципиально отличается от выявленных на развитых рынках капитала:1. Период владения инвестициями для ФПИ развивающихся стран меньше, чем для развитых стран и в среднем составляет 3,3 года.

Class Differences in Real Estate Private Equity Fund Performance

Real estate private equity (REPE) funds are often differentiated by risk class: Core, Value-Added, or Opportunistic. Fund class is used by investors and managers to allocate funds and to describe investment policies. In this paper, we use REPE fund cash flow data from Burgiss that allow us to calculate a variety of performance metrics. For a subset of the data, we also observe characteristics of underlying fund holdings. Despite evidence that Value-Added and Opportunistic funds differ in investment composition, we show that class does not do a good job of predicting differences in performance. Unsurprisingly, greater investment in development (as assessed ex post), predicts poor performance for funds raised just before the Great Recession.

A New Index of Private Offering Fund for Stock Strategy

As the deepening reform of China's financial system, private equity funds have been becoming an important part of China's financial system, but there is little research on the index of private equity funds. This paper constructs an index, which covers 98.19% of the stock equity strategy class of equity funds, can better reflect the performance of equity strategy class private equity fund. Through Granger causality test, the Shanghai composite index is a factor that affects the performance of private equity funds in the short term, and in long term they are both factors to each other. The establishment of private equity fund performance index, is conducive to investors and regulatory authorities to further understand the status and history of the private sector. a scientifical private equity fund performance index does not exist at present, so this paper introduced the performance index of private equity funds to improve the financial indicators system, has a strong theoretical and practical significance.

The Performance of Private Equity Funds in India

Research on Indian private equity is only beginning to emerge, with most of it focused on development, case studies, and the life cycle of private equity returns. We examine a dataset of Indian private equity firms ‘exits from 2007 to 2012 to investigate three issues: First, we analyze the performance of private equity funds of exited investments in India. Second, we compare Indian private equity industry returns with public market returns; and third, we test performance persistence.

Private Equity Fund Performance and Persistency by Fund Type

This study investigates the private equity funds’ performances and persistence by fund type. Diversification benefit exists between public equity and private equity and among different types of private equity funds. The net IRR of private equity funds depends on fund type, economic growth, stock market performance, inflation and interest rate. Fund performance was negatively correlated with capital inflow to private equity market and fund size. Fund size and series are positively correlated. Performance persistency exists in private equity fund managers. Fund type is very important factor in analyzing private equity fund performance and persistency.

How Fair are the Valuations of Private Equity Funds?

The ultimate performance of private equity funds is only known once all investments have been sold, and the cash returned to investors. This typically takes over a decade. In the meantime, the reported performance depends on the valuation of the remaining portfolio companies. Private equity houses market their next fund on the basis of these interim valuations of their current fund. In this paper we analyze whether these valuations are fair, whether the extent of conservative or aggressive valuations differ during the life of the fund, and at what stage interim performance measures predict ultimate performance. This paper is the first to use the quarterly valuations and cash flows for the entire history of 761 fund investments made by Calpers – the largest U.S. investor in private equity. Our main findings are as follows. First, over the entire life of the fund we find evidence that fund valuations are conservative, and tend to be smoothed (relative to movements in public markets): valuations understate subsequent distributions by around 35% on average. We find a significant jump in valuations in the fourth-quarter, when funds are normally audited. Second, the exception to this general conservatism is the period when follow-on funds are being raised. We find that valuations, and reported returns, are inflated during fundraising, with a gradual reversal once the follow-on fund has been closed. Third, we find that the performance figures reported by funds during fund-raising have little power to predict ultimate returns. This is especially true when performance is measured by IRR. Using public market equivalent measures increases predictability significantly. Our results show that investors should be extremely wary of basing investment decisions on the returns - especially IRRs – of the current fund.

Private Equity Fund Performance Signals and the Likelihood of Follow-on Fundraising

Drawing upon signaling theory and the attention-based view of the firm, we study if signal receivers attend differently to different types of signals when they interact with different firms or operate under different market conditions. Our theorizing and empirical analysis is situated in the context of the follow-on fundraising activities by private equity managers managing a first fund. Using a sample of 238 private equity partnerships, we find that overall performance of the first private equity fund and its two components, namely realized performance and unrealized performance, positively influence the likelihood of raising a follow-on fund. Nevertheless, the impact of realized performance on fundraising is less important for funds investing in early stage companies (early stage funds) as compared to funds investing in mature companies (late stage funds). Moreover, realized performance is a more important signal to fund investors in hot equity markets than in cold equity markets. We discuss the implica...

Private Equity Funds of Funds vs. Funds: A Performance Comparison

Based on a comprehensive sample of 1,641 funds, this article investigates the performance of private equity funds of funds versus direct fund investments. On a risk-adjusted basis, funds of funds outperform the aggregated direct funds. When separated into categories such as buyout, venture, and fund of funds, buyout funds exhibit the most attractive risk–return profile. Analyzing how fund performance depends on macroeconomic variables, direct funds generate pro-cyclical returns: Returns increase with high public market performance and economic growth as well as declining corporate bond yields. For funds of funds, we cannot observe such a pattern. <b>TOPICS:</b>Private equity, statistical methods, analysis of individual factors/risk premia, performance measurement

The Performance of Private Equity Funds

The Performance of Private Equity Funds