On the Performance of Private Equity Investments: Does Market Timing Matter?

34 Pages Posted: 22 Apr 2004

See all articles by Daniel Schmidt

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research

Eric Nowak

Swiss Finance Institute; University of Lugano

Alexander Knigge

Lufthansa Consulting

Date Written: March 2004

Abstract

This paper investigates the market timing abilities of private equity fund managers using a unique set of detailed cash-flow data. We show that investment timing has an impact on the performance of venture capital funds. Surprisingly, divestment timing has no such impact on returns. For later-staged buyout funds our analysis reveals that fund performance is not driven by market timing but is significantly related to the experience of the individual fund manager. Thus, for successful investing into more mature portfolio companies, getting access to better deal flow and managing the investment affect the resulting success of these investments. Our results complement other recent findings on the performance of private equity funds.

Keywords: Private equity, Venture capital, Fund management, Market timing

JEL Classification: G23, G11

Suggested Citation

Schmidt, Daniel and Nowak, Eric and Knigge, Alexander, On the Performance of Private Equity Investments: Does Market Timing Matter? (March 2004). Available at SSRN: https://ssrn.com/abstract=492982 or http://dx.doi.org/10.2139/ssrn.492982

Daniel Schmidt

University of Frankfurt, CEPRES Center of Private Equity Research ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Eric Nowak (Contact Author)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University of Lugano ( email )

Via Buffi 13
CH-6900 Lugano
Switzerland
+41-91-9124-637 (secr. -712) (Phone)
+41-91-9124-647 (Fax)

Alexander Knigge

Lufthansa Consulting ( email )

Cologne
Germany

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