Abstract

http://ssrn.com/abstract=1890777
 
 

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Do Private Equity Fund Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance


David T. Robinson


Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Berk A. Sensoy


Ohio State University - Fisher College of Business

July 18, 2013

The Review of Financial Studies, Forthcoming
AFA 2012 Chicago Meetings Paper
Charles A. Dice Center Working Paper No. 2011-14
UCD & CalPERS Sustainability & Finance Symposium 2013
Fisher College of Business Working Paper No. 2011-03-014

Abstract:     
We study the relations between management contract terms and performance in private equity using new data for 837 funds from 1984-2010. We nd no evidence that higher fees or lower managerial ownership are associated with lower net-of-fee performance. Nevertheless, compensation rises and shifts to performance-insensitive components during fundraising booms. Further, the behavior of distributions around contractual fee triggers is consistent with an underlying agency conflict between investors and fund managers. Our evidence suggests that managers with higher fees deliver higher gross performance, and highlights that agency costs are an inevitable consequence of the information frictions endemic to agency relationships.

Number of Pages in PDF File: 50

Keywords: Private Equity, Cash Flows, Performance, Fees, Carried Interest, Ownership

JEL Classification: G01, G23, G24

Accepted Paper Series


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Date posted: July 22, 2011 ; Last revised: July 22, 2013

Suggested Citation

Robinson, David T. and Sensoy, Berk A., Do Private Equity Fund Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance (July 18, 2013). The Review of Financial Studies, Forthcoming ; AFA 2012 Chicago Meetings Paper; Charles A. Dice Center Working Paper No. 2011-14; UCD & CalPERS Sustainability & Finance Symposium 2013; Fisher College of Business Working Paper No. 2011-03-014. Available at SSRN: http://ssrn.com/abstract=1890777 or http://dx.doi.org/10.2139/ssrn.1890777

Contact Information

David T. Robinson
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-8023 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Berk A. Sensoy (Contact Author)
Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States

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