Mutual Fund Investments in Private Firms
74 Pages Posted: 27 Mar 2017 Last revised: 4 Mar 2018
Date Written: January 16, 2018
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: Suggested Citation