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http://ssrn.com/abstract=2304808
 
 

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Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds


Robert S. Harris


University of Virginia - Darden School of Business

Tim Jenkinson


University of Oxford - Said Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Steven N. Kaplan


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Rüdiger Stucke


University of Oxford - Said Business School

February 28, 2014

Darden Business School Working Paper No. 2304808
Fama-Miller Working Paper

Abstract:     
The conventional wisdom for investors in private equity funds is to invest in partnerships that have performed well in the past. This is based on the belief that performance in private equity persists across funds of the same partnership. We present new evidence on the persistence of U.S. private equity (buyout and venture capital) funds using a research-quality dataset from Burgiss, sourced from over 200 institutional investors. Relying on detailed cash-flow data for funds, we study the persistence of buyout and venture capital fund performance of the same general partners across different funds. We pay particular attention to persistence pre- and post-2000. Previous research, studying largely pre-2000 data, has found strong persistence for both buyout and venture capital firms. We confirm the previous findings on persistence in pre-2000 funds. There is persistence for buyout funds and, particularly, for venture funds. Post-2000, we find little evidence of persistence for buyout funds, except at the lower end of the performance distribution. When funds are sorted by the quartile of performance of their previous funds, performance of the current fund is statistically indistinguishable regardless of quartile. Performance for partnerships in all previous fund quartiles exceeds those of public markets as measured by the S&P 500. Regression results confirm the absence of persistence post-2000 except for funds in the lower end of the performance distribution. Post-2000, we find that performance in venture capital funds remains as persistent as pre-2000. Partnerships whose previous venture capital funds are below the median for their vintage year subsequently tend to be below median and have returns below those of the public markets (S&P 500). Partnerships in the top two quartiles tend to stay above the median and their returns exceed those of the public markets.

Number of Pages in PDF File: 38

Keywords: Private equity, performance persistence, venture capital

JEL Classification: G2, G11

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Date posted: August 2, 2013 ; Last revised: August 30, 2014

Suggested Citation

Harris, Robert S. and Jenkinson, Tim and Kaplan, Steven N. and Stucke, Rüdiger, Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds (February 28, 2014). Darden Business School Working Paper No. 2304808; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2304808 or http://dx.doi.org/10.2139/ssrn.2304808

Contact Information

Robert S. Harris
University of Virginia (UVA) - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)
HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm
Tim Jenkinson
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)
HOME PAGE: http://www.sbs.oxford.edu/timjenkinson
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Steven Neil Kaplan (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Rüdiger Stucke
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
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