Private Equity Indices Based on Secondary Market Transactions

Fisher College of Business Working Paper No. 2018-03-021

Charles A. Dice Center Working Paper No. 2018-21

55 Pages Posted: 25 Oct 2018 Last revised: 14 Sep 2019

See all articles by Brian H. Boyer

Brian H. Boyer

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Taylor Nadauld

Brigham Young University

Keith Vorkink

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: September 11, 2019

Abstract

We propose a new approach to evaluating the performance of private equity investments using actual prices paid for LP shares of funds transacted in secondary markets. Our transaction-based indices exhibit substantially higher CAPM betas and lower alphas than NAV-based indices even after adjusting for staleness in NAVs. Our indices load on an additional funding liquidity factor that is uncorrelated with NAV-based index returns. In comparison, a listed PE index exhibits similar loadings on the market and funding liquidity factor as our indices, but significantly lower average returns. Our indices are useful for quarter-to-quarter benchmarking and valuing illiquid stakes in funds.

Keywords: Private Equity, Secondary Market for Private Equity Funds, Market Index

JEL Classification: G11, G23, G24

Suggested Citation

Boyer, Brian H. and Nadauld, Taylor and Vorkink, Keith and Weisbach, Michael S., Private Equity Indices Based on Secondary Market Transactions (September 11, 2019). Charles A. Dice Center Working Paper No. 2018-21. Available at SSRN: https://ssrn.com/abstract=3272357 or http://dx.doi.org/10.2139/ssrn.3272357

Brian H. Boyer

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States

Taylor Nadauld

Brigham Young University ( email )

Provo, UT 84602
United States

Keith Vorkink

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States

Michael S. Weisbach (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
167
Abstract Views
886
rank
146,206
PlumX Metrics