Abstract

http://ssrn.com/abstract=473341
 
 

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Private Equity Performance: Returns, Persistence and Capital Flows


Steven N. Kaplan


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

Antoinette Schoar


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

November 2003

MIT Sloan Working Paper No. 4446-03; AFA 2004 San Diego Meetings

Abstract:     
This paper investigates the performance of private equity partnerships using a data set of individual fund returns collected by Venture Economics. Over the sample period, average fund returns net of fees approximately equal the S&P 500 although there is a large degree of heterogeneity among fund returns. Returns persist strongly across funds raised by individual private equity partnerships. The returns also improve with partnership experience. Better performing funds are more likely to raise follow-on funds and raise larger funds than funds that perform poorly. This relationship is concave so that top performing funds do not grow proportionally as much as the average fund in the market. At the industry level, we show that market entry in the private equity industry is cyclical. Funds (and partnerships) started in boom times are less likely to raise follow-on funds, suggesting that these funds subsequently perform worse. Aggregate industry returns are lower following a boom, but most of this effect is driven by the poor performance of new entrants, while the returns of established funds are much less affected by these industry cycles. Several of these results differ markedly from those for mutual funds.

Number of Pages in PDF File: 46

Keywords: private equity partnerships, fund returns,

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Date posted: December 4, 2003  

Suggested Citation

Kaplan, Steven N. and Schoar, Antoinette, Private Equity Performance: Returns, Persistence and Capital Flows (November 2003). MIT Sloan Working Paper No. 4446-03; AFA 2004 San Diego Meetings. Available at SSRN: http://ssrn.com/abstract=473341 or http://dx.doi.org/10.2139/ssrn.473341

Contact Information

Steven Neil Kaplan
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
Antoinette Schoar (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive, E52-447
Cambridge, MA 02142
United States
617-253-3763 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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