Private Company Valuations by Mutual Funds*

Vikas Agarwal, Brad Barber, Si Cheng, Allaudeen Hameed and Ayako Yasuda

Review of Finance, 2023, vol. 27, issue 2, 693-738

Abstract: Mutual fund families set and report values of their private startup holdings, which affect the fund net asset value (NAV) at which investors buy/sell fund shares. We test three hypotheses related to the valuation practice: (i) information cost/access, (ii) litigation risk, and (iii) strategic NAV management. Consistent with (i), families with larger PE holdings and/or stronger information access update valuations more frequently in the absence of public information releases, their updates co-move less with other families, and their fund returns jump less at follow-on financings. We find no support for hypotheses (ii) or (iii). We also find that high-PE-exposure funds are subject to greater financial fragility.

Keywords: Mutual funds; Venture capital; Private valuation; Stale prices; Financial fragility (search for similar items in EconPapers)
JEL-codes: G23 G24 G28 G32 M13 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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