Performance Persistence in Private Equity Funds

51 Pages Posted: 4 Oct 2010 Last revised: 1 Mar 2012

Date Written: March 1, 2012

Abstract

Performance persistence in the private equity industry is not long-lived. Current fund performance is positively and significantly associated with the performance of the first follow-on fund, but the magnitude of persistence substantially declines afterwards. Persistence, if any, is largely driven by relatively underperforming funds. Furthermore, excessive fund growth, conditional on past performance, erodes persistence, and the commonality of market conditions between two successive funds partially explains performance persistence. The findings are not conclusive about whether general partners have proprietary skills, but have important implications for the capital allocation decisions of investors in the private equity industry.

Keywords: Private Equity, Performance, Persistence

JEL Classification: G23, G24

Suggested Citation

Chung, Ji-Woong, Performance Persistence in Private Equity Funds (March 1, 2012). Available at SSRN: https://ssrn.com/abstract=1686112 or http://dx.doi.org/10.2139/ssrn.1686112

Ji-Woong Chung (Contact Author)

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

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