Do Private Equity Managers Raise Funds on (Sur)real Returns? Evidence from Deal-Level Data

84 Pages Posted: 25 Oct 2019 Last revised: 19 May 2022

See all articles by Niklas Hüther (Huether)

Niklas Hüther (Huether)

Indiana University - Kelley School of Business

Date Written: May 1, 2022

Abstract

Recent studies on agency problems in private equity fueled the suspicion that fund managers strategically manipulate performance estimates around fundraising times. While these studies use aggregated portfolio data, this paper offers the first analysis of "window dressing" in private equity based on deal-level performance. In contrast to previous findings of a smoking gun at the fund level, I do not find any evidence of inflated performance at the deal level. Fund performance peaks are driven by a cohort effect whereby late investments are made under pressure before fundraising and have lower returns than those made earlier in the fund’s life.

Keywords: Private Equity, Performance Manipulation, Financial Intermediation, Fundraising

JEL Classification: G10, G20, G23, G24

Suggested Citation

Hüther, Niklas, Do Private Equity Managers Raise Funds on (Sur)real Returns? Evidence from Deal-Level Data (May 1, 2022). Available at SSRN: https://ssrn.com/abstract=3470517 or http://dx.doi.org/10.2139/ssrn.3470517

Niklas Hüther (Contact Author)

Indiana University - Kelley School of Business ( email )

1275 E 10th St
Bloomington, IN 47405
United States

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