The Limited Partnership Model in Private Equity: Deal Returns over a Fund's Life

Center for Entrepreneurial and Financial Studies Working Paper No. 2014-01

43 Pages Posted: 19 Mar 2014

See all articles by Reiner Braun

Reiner Braun

Technische Universität München (TUM) - TUM School of Management; Center for Entrepreneurial and Financial Studies

Maximilian Schmidt

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS)

Date Written: January 10, 2014

Abstract

Private equity (PE) fund managers recurrently close limited partnerships, thereby running several funds simultaneously. Conceptually, the limited partnership model as a form of financial intermediation should not have any impact on decisions about single PE investments and returns. This study takes advantage of a unique database containing cash flow data on 10,566 investments by 702 PE limited partnerships. We note a robust drop in investment returns once a new limited partnership is established. This pattern has increasingly emerged since the late-1990s. We conclude that the current governance form of limited partnership model is of questionable benefit in a matured PE industry

Keywords: Financial intermediation, private equity, limited partnership, returns

JEL Classification: G11, G20

Suggested Citation

Braun, Reiner and Schmidt, Maximilian, The Limited Partnership Model in Private Equity: Deal Returns over a Fund's Life (January 10, 2014). Center for Entrepreneurial and Financial Studies Working Paper No. 2014-01, Available at SSRN: https://ssrn.com/abstract=2411044 or http://dx.doi.org/10.2139/ssrn.2411044

Reiner Braun

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, Deutschland 80333
Germany
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HOME PAGE: http://www.ef.wi.tum.de/

Center for Entrepreneurial and Financial Studies ( email )

Arcisstrasse 21
Munich, DE 80333
Germany

Maximilian Schmidt (Contact Author)

Technische Universität München (TUM) - Center for Entrepreneurial and Financial Studies (CEFS) ( email )

Arcisstraße 21
München, 80333
Germany

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