Can Investors Time Their Exposure to Private Equity?

38 Pages Posted: 13 Sep 2018  

Gregory W. Brown

University of North Carolina (UNC) at Chapel Hill - Finance Area

Robert S. Harris

University of Virginia - Darden School of Business

Wendy Hu

Burgiss

Tim Jenkinson

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

Steven N. Kaplan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: September 2018

Abstract

Private equity performance, both for buyouts and venture capital, has been highly cyclical: periods of high fundraising have been followed by periods of low absolute performance. Despite this seemingly predictable variation, we find modest gains, at best, to pursuing more realistic, investable strategies that time capital commitments to private equity. This occurs because investors can only time their commitments to funds; they cannot time when their commitments are called or when their investments are exited. There is a high degree of time-series correlation in net cash flows even across commitment strategies that allocate capital in a very different manner over time.

Keywords: Private equity, venture capital, commitment strategies, buyouts

JEL Classification: G11

Suggested Citation

Brown, Gregory W. and Harris, Robert S. and Hu, Wendy and Jenkinson, Tim and Kaplan, Steven N. and Robinson, David T., Can Investors Time Their Exposure to Private Equity? (September 2018). Available at SSRN: https://ssrn.com/abstract=3241102 or http://dx.doi.org/10.2139/ssrn.3241102

Gregory W. Brown (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Robert S. Harris

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4823 (Phone)
434-924-4859 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/harris.htm

Wendy Hu

Burgiss ( email )

111 River St., 10th Floor
Hoboken, NJ 07030
United States

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 ECARES ULB CP 114
B-1050 Brussels
Belgium

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

Steven Neil Kaplan

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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