Buy low, sell high? Do private equity fund managers have market timing abilities?

Tim Jenkinson, Stefan Morkoetter, Tobias Schori and Thomas Wetzer

Journal of Banking & Finance, 2022, vol. 138, issue C

Abstract: When investors commit capital to a private equity fund, the money is not immediately invested but is called by the fund manager throughout an investment period of up to five years. The private equity business model allows fund managers to invest and divest the committed capital during the fund's lifetime at their own discretion, which gives them the flexibility to time the markets. Based on 7,591 private equity deals, which are benchmarked against 14,390 M&A transaction multiples, we find evidence that on average private equity funds are able to create value by timing the financial markets. Market timing ability is not captured by performance measures such as the PME, yet it is a potential source of returns for investors.

Keywords: Private equity; Mergers and acquisitions; Value creation; Market timing (search for similar items in EconPapers)
JEL-codes: G15 G20 G34 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:138:y:2022:i:c:s0378426622000243

DOI: 10.1016/j.jbankfin.2022.106424

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