44 Pages Posted: 2 Jul 2014 Last revised: 18 Feb 2017
Date Written: April 5, 2016
We introduce a methodology to estimate the historical time-series of returns to investment in private equity funds. The approach requires only an unbalanced panel of cash contributions and distributions accruing to limited partners, and is robust to sparse data. We decompose private equity returns into a component due to traded factors and a time-varying private equity premium. We find strong cyclicality in private equity returns that differs according to fund type. The time-series estimates allow us to directly test theories about private equity cyclicality, and we find evidence that capital market segmentation helps to determine private equity returns.
Suggested Citation: Suggested Citation
Ang, Andrew and Chen, Bingxu and Goetzmann, William N. and Phalippou, Ludovic, Estimating Private Equity Returns from Limited Partner Cash Flows (April 5, 2016). Netspar Discussion Paper No. 06/2014-021; Saïd Business School WP 2014-8. Available at SSRN: https://ssrn.com/abstract=2460789