Morgan Stanley Roundtable on the State of Global Private Equity

28 Pages Posted: 22 Dec 2011

See all articles by Alan Jones

Alan Jones

affiliation not provided to SSRN

Steven N. Kaplan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); University of Chicago - Polsky Center for Entrepreneurship

Carl Ferenbach

affiliation not provided to SSRN

Mike Bingle

affiliation not provided to SSRN

Marc Lipschultz

affiliation not provided to SSRN

Phil Canfield

affiliation not provided to SSRN

Date Written: Fall 2011

Abstract

In this discussion led by Alan Jones, Morgan Stanley's head of Global Private Equity, the University of Chicago's Steve Kaplan begins by surveying 25 years of academic research on private equity. Starting with Kaplan's own Ph.D. dissertation on leveraged buyouts during the 1980s, finance academics have provided a large and growing body of studies documenting the ability of private equity firms to make “sustainable” (that is, maintained over a three‐ or four‐year period) improvements in the operating performance of their portfolio companies, whether operating abroad or in the U.S. Even more impressive, the findings of Kaplan's new study (with Tim Jenkinson of Oxford and Bob Harris of the University of Virginia) suggest that these improvements have been large enough to enable PE funds raised between 1990 and 2008 to deliver returns to their limited partners that have averaged 300 to 400 basis points higher per year than the returns to the S&P 500. And given the “persistence” of PE fund returns - the tendency of the funds of the same PE firms to show up in the top quartile of performers year after year - that Kaplan has documented in earlier work, the performance of private equity seems notably different from that of mutual funds and hedge funds, where there has been little if any consistency in the returns provided by the top performers. Following Kaplan's overview of the research, four representatives of today's leading private equity firms explore questions like the following:. As Jones notes in his opening comments, the practitioners' answers to such questions “should help investors distinguish between the alpha that the firms represented at this table have generated through active management from the ‘closet beta’ that critics say results when private equity firms simply create what amounts to a levered bet on the public equity markets.”

Suggested Citation

Jones, Alan and Kaplan, Steven Neil and Ferenbach, Carl and Bingle, Mike and Lipschultz, Marc and Canfield, Phil, Morgan Stanley Roundtable on the State of Global Private Equity (Fall 2011). Journal of Applied Corporate Finance, Vol. 23, Issue 4, pp. 8-33, 2011, Available at SSRN: https://ssrn.com/abstract=1975681 or http://dx.doi.org/10.1111/j.1745-6622.2011.00350.x

Alan Jones

affiliation not provided to SSRN

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

European Corporate Governance Institute (ECGI) ( email )

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

University of Chicago - Polsky Center for Entrepreneurship

Chicago, IL 60637
United States

Carl Ferenbach

affiliation not provided to SSRN

No Address Available

Mike Bingle

affiliation not provided to SSRN

No Address Available

Marc Lipschultz

affiliation not provided to SSRN

No Address Available

Phil Canfield

affiliation not provided to SSRN

No Address Available

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
8
Abstract Views
1,700
PlumX Metrics