Style Drift in Private Equity
37 Pages Posted: 30 Jun 2004 Last revised: 5 Jan 2009
Date Written: April 25, 2005
We introduce the concept of style drift to private equity investment. We present theory and evidence pertaining to style drifts in terms of a fund manager's stated focus on particular stages of entrepreneurial development. We develop a model that derives conditions under which style drifts are less likely among younger fund managers. We also show ways in which changes in market conditions can affect style drifts, and differences for funds committed to early-stage investments compared to funds committed to late-stage investments. We find some evidence of a positive relation between style drifting and investment performance.
Keywords: Private Equity, Venture Capital, Style Drift
JEL Classification: G24, G28, G31, G32, G35
Suggested Citation: Suggested Citation