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

47 Pages Posted: 25 Oct 2019

See all articles by Niklas Hüther

Niklas Hüther

Indiana University - Kelley School of Business

Date Written: October 15, 2019

Abstract

Recent studies on agency problems in private equity have fueled the suspicion that fund managers strategically manipulate performance estimates around fundraising times. While these studies rely on aggregated portfolio data, this paper offers the first empirical analysis of "window dressing'' in private equity based on quarterly reported 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. Observed interim peaks in valuation at the fund level result from lower returns on deals made under pressure to invest unspent capital closer to fundraising.

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 (October 15, 2019). 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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