Buy Low, Sell High? Do Private Equity Fund Managers Have Market Timing Abilities?

36 Pages Posted: 10 Apr 2018 Last revised: 30 Mar 2022

See all articles by Tim Jenkinson

Tim Jenkinson

University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Stefan Morkoetter

University of St. Gallen - School of Finance; University of St.Gallen / St.Gallen Institute of Management in Asia

Tobias Schori

University of St. Gallen

Thomas Wetzer

University of St. Gallen

Date Written: March 30, 2018

Abstract

When investors commit capital to a private equity fund, the money is not immediately invested but is called by the fund manager throughout an investment period of up to five years. This business model allows private equity fund managers to invest the committed capital at their own discretion, which gives them the flexibility to time the markets. Based on 5,209 private equity deals, which are benchmarked against 10,710 M&A transaction multiples, we find evi-dence that on average private equity funds are able to create value by timing the financial mar-kets. Market timing ability is not captured by performance measures such as the PME, yet it is a potential source of returns for investors.

Keywords: Private Equity, Mergers and Acquisitions, Value Creation, Market Timing

JEL Classification: G15, G20, G34

Suggested Citation

Jenkinson, Tim and Morkoetter, Stefan and Schori, Tobias and Wetzer, Thomas, Buy Low, Sell High? Do Private Equity Fund Managers Have Market Timing Abilities? (March 30, 2018). Available at SSRN: https://ssrn.com/abstract=3152734 or http://dx.doi.org/10.2139/ssrn.3152734

Tim Jenkinson

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
United Kingdom
+44 1865 288916 (Phone)
+44 1865 288831 (Fax)

HOME PAGE: http://www.sbs.oxford.edu/timjenkinson

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http://www.ecgi.org

Stefan Morkoetter (Contact Author)

University of St. Gallen - School of Finance ( email )

111 Amoy Street
Singapore, 069931
Singapore

University of St.Gallen / St.Gallen Institute of Management in Asia ( email )

111 Amoy Street
Singapore, 069931
Singapore

Tobias Schori

University of St. Gallen ( email )

Bodanstrasse 8
SIAW-HSG
St.Gallen, 9000
Switzerland

Thomas Wetzer

University of St. Gallen ( email )

Dufourstrasse 50
St.Gallen, CH-9000
Switzerland

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