The Disintermediation of Financial Markets: Direct Investing in Private Equity / Lily Fang, Victoria Ivashina, Josh Lerner.

Format:

Book

Author/Creator:

Fang, Lily.

Contributor:

National Bureau of Economic Research.

Ivashina, Victoria.

Lerner, Josh.

Series:

Working Paper Series (National Bureau of Economic Research) no. w19299.

NBER working paper series no. w19299

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Disintermediation of Financial Markets

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

One of the important issues in corporate finance is the rationale for and role of financial intermediaries. In the private equity setting, institutional investors are increasingly eschewing intermediaries in favor of direct investments. To understand the trade-offs in this setting, we compile a proprietary dataset of direct investments from seven large institutional investors. We find that solo investments by institutions outperform co-investments and a wide range of benchmarks for traditional private equity partnership investments. The outperformance is driven by deals where informational problems are not too severe, such as more proximate transactions to the investor and later-stage deals, and by an ability to avoid the deleterious effects on returns often seen in periods with large inflows into the private equity market. The poor performance of co-investments, on the other hand, appears to result from fund managers' selective offering of large deals to institutions for co-investing.

Notes:

Print version record

August 2013.