The cash flow, return and risk characteristics of private equity / Alexander Ljungqvist, Matthew Richardson.

Format:

Book

Author/Creator:

Ljungqvist, Alexander.

Contributor:

National Bureau of Economic Research.

Richardson, Matthew.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9454.

NBER working paper series no. w9454

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. We document the draw down and capital return schedules for the typical private equity fund, and show that it takes several years for capital to be invested, and over ten years for capital to be returned to generate excess returns. We provide several determining factors for these schedules, including existing investment opportunities and competition amongst private equity funds. In terms of performance, we document that private equity generates excess returns on the order of five plus percent per annum relative to the aggregate public equity market. One interpretation of this magnitude is that it represents compensation for holding a 10-year illiquid investment.

Notes:

Print version record

January 2003.