Private Equity Fund Performance and Persistency by Fund Type

2014 ◽  
Vol 22 (3) ◽  
pp. 531-564
Author(s):  
IK Song ◽  
Ji Eun Kang ◽  
Chang Hyun Yun
Keyword(s):  
Private Equity ◽  
Fund Performance ◽  
Equity Fund ◽  
Private Equity Fund ◽  
Fund Managers ◽  
Stock Market Performance ◽  
Equity Funds ◽  
Performance Persistency ◽  
Private Equity Funds ◽  
Fund Size

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.

The Private Equity Fund

2020 ◽  
pp. 40-106
Author(s):  
John Gilligan ◽  
Mike Wright
Keyword(s):  
Private Equity ◽  
Insurance Companies ◽  
Equity Fund ◽  
Investment Funds ◽  
Sovereign Wealth Funds ◽  
Private Equity Fund ◽  
Fund Managers ◽  
Limited Life ◽  
Equity Funds ◽  
Private Equity Funds

This chapter discusses private equity funds. It looks at the typical fund structures, who invests in private equity, and compares and contrasts alternative investment options. A private equity fund is a form of ‘investment club’ in which the principal investors are institutional investors, such as pension funds, investment funds, endowment funds, insurance companies, banks, sovereign wealth funds, family offices/high net worth individuals and funds of funds, as well as the private equity fund managers themselves. Private equity funds have a limited life, meaning that there is a pre-agreed date on which they will stop making new investments and subsequently be wound up. Typically, a fund invests in new projects for six years and is wound up in ten years. There is a standard extension period of two years in most fund agreements, hence they are generally known as ‘ten plus two’ limited life funds. In the past few years, some longer-term funds have started to be raised by some fund managers. These are typically targeting growth capital. The chapter then differentiates limited partners (external investors) from the general partner (the manager). It also studies the economics of private equity, examines the details of a representative Limited Partners Agreement as well as taxation, and describes the secondary fund market.

Industry-Wise Investment Pattern of Select Private Equity Funds in India

2018 ◽  
Keyword(s):  
Financial Services ◽  
Private Equity ◽  
Equity Fund ◽  
Equity Investment ◽  
Private Equity Fund ◽  
Investment Pattern ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Indispensable Tool

The article is an analysis of Private Equity investment deal values across 24 industries by select Private Equity funds from 2007–2016. The purpose of the research is to identify any patterns of movement of deal values. The study established the growth rate of deal values and observed the performance of each Private Equity fund throughout the 10-year period. The purpose of the study is to determine the significance of Private Equity investment for the promotion, growth, and development of industries. In the case of heavy industries such as Energy, Engineering and Construction and Manufacturing, Private Equity investment becomes inevitable, at least as a supplement to government funding. Due to rising disposable income and purchasing power of people, industries such as BFSI (Banking, Financial Services, and Insurance) Retail, and other services such as Travel, Transport, and Telecom are also attracting considerable Private Equity. The role of Private Equity as an indispensable tool for industrialization is emerging and becoming dynamic. Furthermore, the government’s go-ahead attitude towards reforms is further boosting Private Equity investment’s opportunities and impact on India’s economic development.

The Private Equity Market

2020 ◽  
pp. 1-39
Author(s):  
John Gilligan ◽  
Mike Wright
Keyword(s):  
Private Equity ◽  
Early Stage ◽  
Equity Market ◽  
Capital Investments ◽  
Risk Capital ◽  
Equity Fund ◽  
Public Markets ◽  
Private Equity Fund ◽  
Fund Managers ◽  
Equity Funds

This chapter defines private equity, describes the origins of the private equity market, and examines the data on the size and growth of the private equity industry. Private equity is risk capital provided outside the public markets. The businesses invested in by private equity range from early stage ventures, usually termed venture capital investments, through businesses requiring growth or development capital to the purchase of an established business in a management buyout or buy-in. Much, but not all, of the investing done in the private equity market is by private equity funds. The objective of a private equity fund is to invest equity or risk capital in a portfolio of private companies which are identified and researched by the private equity fund managers. The chapter then considers what private equity fund managers do. It also provides a brief history of private equity before assessing how big the private equity market is.

Private Equity Net Asset Values and Future Cash Flows

2019 ◽  
Vol 95 (1) ◽  
pp. 191-210 ◽  
Author(s):  
Tim Jenkinson ◽  
Wayne R. Landsman ◽  
Brian R. Rountree ◽  
Kazbi Soonawalla
Keyword(s):  
Private Equity ◽  
Fair Value ◽  
Cash Flows ◽  
Systematic Bias ◽  
Private Equity Fund ◽  
Fund Managers ◽  
Asset Values ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Future Cash Flows

ABSTRACT This study analyzes whether fair value estimates of fund net asset values (NAVs) produced by private equity managers are accurate and unbiased predictors of future discounted cash flows (DCFs). We exploit the fact that private equity funds have finite lives to compare reported NAVs to DCFs based on realized cash flows for 384 Venture Capital (VC) funds and 195 Buyout funds spanning 1988–2016. Findings reveal that Buyout funds' NAVs display little systematic bias, but VC funds' NAVs are relatively aggressively biased compared to Buyout funds, especially since 2000. Accuracy is worse in the first half of the sample period even though NAV estimates generally are more conservative. Overall, the results reveal significant differences in the association between NAVs and DCFs for Buyout versus VC funds, which is particularly important for private equity fund investors in their consideration of the relevance and reliability of NAV estimates provided by fund managers.

SEC targets broker-dealer implications of transaction-based deal fees

2016 ◽  
Vol 17 (4) ◽  
pp. 75-76
Author(s):  
Jason Daniel
Keyword(s):  
Private Equity ◽  
Securities And Exchange Commission ◽  
Equity Fund ◽  
Content Type ◽  
Private Equity Fund ◽  
Enforcement Action ◽  
Policies And Procedures ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Brokerage Commissions

Purpose To explain a US Securities and Exchange Commission (SEC) enforcement action against a registered investment adviser to private equity funds for allegedly providing brokerage services in connection with the acquisition and disposition of the securities of portfolio companies while not being registered as a broker dealer, making undisclosed use of fund assets, and failing to adopt policies and procedures designed to prevent the alleged violations. Design/methodology/approach Describes the services provided by the investment adviser, the compensation paid, and the SEC’s other bases for enforcement, and draws conclusions for private equity fund advisers. Findings The SEC has begun pursuing transaction-based compensation paid to private equity fund advisers relating to portfolio company transactions as illegal brokerage commissions. The Commission also continues to target the adviser’s undisclosed use of client fund capital, especially in private equity funds. Originality/value Practical explanation by experienced investment management lawyer.

What will the “Eyes and Ears” of the SEC choose to see and hear this year? OCIE announces examination priorities for 2015

2015 ◽  
Vol 16 (2) ◽  
pp. 26-29
Author(s):  
Kenneth Berman ◽  
Michael P. Harrell ◽  
Gregory Larkin
Keyword(s):  
Private Equity ◽  
Equity Fund ◽  
Content Type ◽  
Private Equity Fund ◽  
Market Participants ◽  
Retail Investors ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Practical Implications ◽  
Analyze Data

Purpose – To discuss and interpret the recently published summary of the select priorities of the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) in connection with the National Exam Program for 2015. Design/methodology/approach – This article highlights the broad OCIE focus areas and provides detail on the associated initiatives. Findings – OCIE’s priorities appear to place particular emphasis on retail investors and investors saving for retirement and market-wide risks, including cybersecurity. The examination priorities also emphasize OCIE’s evolving ability to analyze data to identify and examine registrants that may be engaged in illegal activity. Of particular interest to private equity fund sponsors, the National Exam Program will continue to conduct examinations that focus on fees and expenses borne by investors in private equity funds. Practical implications – In view of the OCIE’s priorities, recent public comments by OCIE officials (concerning, for example, presentation of performance data) and our experience representing private equity firms being examined by OCIE, private equity fund sponsors should continue to be prepared for rigorous examinations on these issues and the areas of focus highlighted by the SEC in the past three years. Originality/value – The article summarizes the OCIE’s recently published examination priorities for 2015 that cover a broad range of market participants and target a variety of their products, practices and procedures, including a continued focus on private equity fund sponsors.

Private Equity in Australia

2009 ◽  
Vol 51 (4) ◽  
pp. 529-542 ◽  
Author(s):  
Mark Westcott
Keyword(s):  
Private Equity ◽  
Listed Company ◽  
Equity Fund ◽  
Private Equity Fund ◽  
Employment Conditions ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Equity Ownership ◽  
Productive Assets ◽  
Work Choices

Private equity investment in Australia has changed in both extent and nature over the last few years. In particular, transactions where a private equity fund buys out a mature publicly listed company have increased. The targeting of ‘iconic’ companies such as Qantas by private equity heightened the concerns held in some quarters of the possible impact of private equity ownership on corporate stability and employment conditions in these companies. This article provides an overview of private equity transactions in Australia. It also reviews the major concerns with the private equity business model, which were presented by various parties to a senate enquiry in 2007. It argues that a window of opportunity was open during 2006 and 2007 for private equity owners to extract returns on their investment by reducing employment costs using the Work Choices legislation. That such an approach was not pursued suggests that private equity funds realize returns through a number of avenues, not just by reducing running costs or rationalizing productive assets.

scholarly journals Performance of Private Equity Funds in Korea

2020 ◽  
Vol 49 (2) ◽  
pp. 163-187
Author(s):  
Kibeum Bae ◽  
Junesuh Yi
Keyword(s):  
Private Equity ◽  
Investment Strategy ◽  
Fund Performance ◽  
Factors Affecting ◽  
Economic Cycles ◽  
Gdp Growth Rate ◽  
Equity Funds ◽  
Private Equity Funds ◽  
Factors Affecting Performance ◽  
Fund Size

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.

scholarly journals Permanent Establishment for Investors in Private Equity Funds—A Legal Analysis in Light of the Changes to the OECD Model (2017)

2019 ◽  
Vol 2019 (1) ◽  
pp. 16-40
Author(s):  
Peter Koerver Schmidt
Keyword(s):  
Private Equity ◽  
Final Outcome ◽  
Legal Analysis ◽  
Equity Fund ◽  
Foreign Investors ◽  
Private Equity Fund ◽  
Permanent Establishment ◽  
Equity Funds ◽  
Private Equity Funds

Abstract The article analyzes whether the investment in a private equity fund may create a permanent establishment (PE) for foreign investors. The analysis is divided into two main parts, as the question of creating a PE for the foreign investors is considered with respect to both the main PE rule and the agency PE rule. The amendments to the PE definition prescribed in the OECD/G20 BEPS report on Action 7, and incorporated into the 2017 version of the OECD Model with Commentary, are taken into consideration. It is concluded that the final outcome depends on the specific setup of the private equity fund at hand and that some degree of uncertainty may often remain. Moreover, the recent amendments to the PE definition do not appear to have reduced this uncertainty—rather the contrary.

scholarly journals Earnings management in the private equity divestment process on Warsaw Stock Exchange

Equilibrium ◽  
2018 ◽  
Vol 13 (4) ◽  
pp. 689-705 ◽  
Author(s):  
Tomasz Sosnowski
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Private Equity ◽  
Stock Exchange ◽  
Market Value ◽  
Discretionary Accruals ◽  
Equity Fund ◽  
Private Equity Fund ◽  
Equity Funds ◽  
Private Equity Funds

Research background: Prior studies suggest that companies which go public manage earnings in order to inflate the issue price. However, for private equity funds the use of such activity can be costly in terms of the reputation capital as they are repetitive stock market players. The results of previous research on the effect of private equity fund on the quality of pre-IPO reported earnings are mixed and inconclusive. Purpose of the article: The main aim of the study is to empirically investigate the use of pre-IPO earnings management by private equity funds in the process of divestment conducted on a stock exchange. Methods: I provide comparisons between PE-backed companies and firms with a similar initial market value and growth potential, using the method of single-linkage clustering to build the study sample. In order to assess the scale of pre-IPO earnings management, I apply the discretionary accruals model of Larcker and Richardson [2004]. Findings & Value added: Using a sample of companies conducting IPO on WSE between 2005 and 2015 I do not find evidence that the presence of private equity fund among the shareholders of the company in the period preceding first listing of shares on a stock market constrains the use of earnings management prior to the IPO. The difference between the discretionary accruals in PE-backed and matched companies, when controlling for the market value and book-to-market ratio, is statistically insignificant. To be specific, companies with private equity funds in their shareholder structure do not exhibit lower scale of earnings management prior to the IPO in comparison to other new stock companies.

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