Private Equity Performance: Returns, Persistence and Capital
Steven N. Kaplan
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
NBER Working Paper No. w9807
This paper investigates the performance of private equity partnerships using a data set of individual fund returns collected by Venture Economics. Over the sample period, average fund returns net of fees approximately equal the S\&P 500 although there is a large degree of heterogeneity. Returns persist strongly across funds raised by individual private equity partnerships. Better performing funds are more likely to raise follow-on funds and raise larger funds than funds that perform poorly. This relationship is concave so that top performing funds do not grow proportionally as much as the average fund. Finally, market entry in private equity is cyclical. Funds (and partnerships) started in boom times are less likely to raise follow-on funds, suggesting that these funds subsequently perform worse. Several of these results differ markedly from those for mutual funds.
Number of Pages in PDF File: 43
Date posted: June 29, 2003