The Performance of Private Equity Funds

Posted: 23 Mar 2009

See all articles by Ludovic Phalippou

Ludovic Phalippou

University of Oxford - Said Business School

Oliver Gottschalg

HEC Paris - Strategy & Business Policy

Date Written: April 2009

Abstract

The performance of private equity funds as reported by industry associations and previous research is overstated. A large part of performance is driven by inflated accounting valuation of ongoing investments and we find a bias toward better performing funds in the data. We find an average net-of-fees fund performance of 3% per year below that of the S&P 500. Adjusting for risk brings the underperformance to 6% per year. We estimate fees to be 6% per year. We discuss several misleading aspects of performance reporting and some side benefits as a first step toward an explanation.

Keywords: G23, G24

Suggested Citation

Phalippou, Ludovic and Gottschalg, Oliver, The Performance of Private Equity Funds (April 2009). The Review of Financial Studies, Vol. 22, Issue 4, pp. 1747-1776, 2009. Available at SSRN: https://ssrn.com/abstract=1365687 or http://dx.doi.org/hhn014

Ludovic Phalippou (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Oliver Gottschalg

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

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