Private Equity Fund Performance: A Time-Series Approach

45 Pages Posted: 6 May 2019 Last revised: 22 Jun 2022

See all articles by Apollon Fragkiskos

Apollon Fragkiskos

Brighthouse Financial

Olga Krasotkina

Markov Processes International LLC

Harold D. Spilker III

University Of Hawaii At Manoa, Shidler College of Business

Russ Wermers

University of Maryland - Robert H. Smith School of Business; European Corporate Governance Institute (ECGI)

Date Written: June 21, 2022

Abstract

We introduce an estimator that measures factor exposures and alphas of individual private equity funds, with minimal assumptions about the fund return data-generating process (DGP). Simulations using varying assumptions about the autoregressive and moving-average properties of the DGP indicate that our estimator exhibits lower mean-squared-error (bias plus variance) than competing estimators. Applying our model to a newly available commercial dataset, PitchBook, we undercover new findings of economic importance: buyout managers have higher average skill levels than claimed by past studies; portfolios are marked with forward-looking and lagged multiples of factors; and skill and systematic exposures vary significantly across vintages.

Keywords: Private Equity, Buyout Funds, Time-Series, Supervised Machine Learning, Jackknife, Cross-Validation, Factor Modeling, Long Horizons, Overlapping Observations

JEL Classification: C01, C22, G12, G17

Suggested Citation

Fragkiskos, Apollon and Krasotkina, Olga and Spilker III, Harold D. and Wermers, Russell R., Private Equity Fund Performance: A Time-Series Approach (June 21, 2022). Available at SSRN: https://ssrn.com/abstract=3367079 or http://dx.doi.org/10.2139/ssrn.3367079

Apollon Fragkiskos (Contact Author)

Brighthouse Financial ( email )

11225 N Community House Rd
Charlotte, NC 28277
United States

HOME PAGE: http://https://www.brighthousefinancial.com/

Olga Krasotkina

Markov Processes International LLC ( email )

25 Maple Street
Summit, NJ 07901
United States

Harold D. Spilker III

University Of Hawaii At Manoa, Shidler College of Business ( email )

2404 Maile Way
Honolulu, HI 96822
United States
8089568738 (Phone)

Russell R. Wermers

University of Maryland - Robert H. Smith School of Business ( email )

Department of Finance
College Park, MD 20742-1815
United States
301-405-0572 (Phone)
301-405-0359 (Fax)

HOME PAGE: http://terpconnect.umd.edu/~wermers/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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