Mutual Fund Investments in Private Firms

74 Pages Posted: 27 Mar 2017 Last revised: 4 Mar 2018

Sungjoung Kwon

Drexel University - Bennett S. LeBow College of Business

Michelle Lowry

Drexel University

Yiming Qian

University of Iowa - Department of Finance

Date Written: January 16, 2018

Abstract

Historically a key advantage of being a public firm was broader access to capital, from a disperse group of shareholders. In recent years, such capital has increasingly become available to private firms as well. We document a dramatic increase over the past twenty years in the number of mutual funds participating in private markets and in the dollar value of these private firm investments. On the demand side, the greater availability of capital changes the trade-off between private and public listing status: mutual fund investments enable companies to stay private significantly longer. On the supply side, mutual funds have benefited from these investments in terms of high returns relative to various benchmarks, diversification relative to these same benchmarks, and possibly higher allocations at the time of the IPO.

Keywords: private firm, mutual fund, IPO

JEL Classification: G23, G24, G32

Suggested Citation

Kwon, Sungjoung and Lowry, Michelle and Qian, Yiming, Mutual Fund Investments in Private Firms (January 16, 2018). Available at SSRN: https://ssrn.com/abstract=2941203 or http://dx.doi.org/10.2139/ssrn.2941203

Sungjoung Kwon

Drexel University - Bennett S. LeBow College of Business ( email )

101 N. 33rd St.
Philadelphia, PA 19104
United States

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

Yiming Qian

University of Iowa - Department of Finance ( email )

S382 Pappajohn Building
Iowa City, IA 52242
United States
319-335-0934 (Phone)
319-335-3690 (Fax)

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