The Performance of Private Equity Funds

Oliver Gottschalg () and Ludovic Phalippou
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Oliver Gottschalg: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: Using a unique and comprehensive dataset, we show that the sample of mature private equityfunds used in previous research and as an industry benchmark is biased towards betterperforming funds. We also show that accounting values reported by these mature funds for nonexitedinvestments are substantial and we provide evidence that they mostly represent living deadinvestments. After correcting for sample bias and overstated accounting values, average fundperformance changes from slight overperformance to substantial underperformance of -3.83% peryear with respect to the S&P 500. Assuming a typical fee structure, we find that gross-of-feesthese funds outperform by 2.96% per year. We conclude that the stunning growth in the amountallocated to this asset class cannot be attributed to genuinely high past performance. We discussseveral potentially misleading aspects of standard performance reporting and discuss some of theadded benefits of investing in private equity funds as a first step towards an explanation for ourresults.

Keywords: Performance; Private Equity Funds (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (7)

Published in 2006

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Related works:
Journal Article: The Performance of Private Equity Funds (2009)
Working Paper: The Performance of Private Equity Funds (2009)
Working Paper: The Performance of Private Equity Funds (2009)
Working Paper: The performance of private equity funds (2006)
Working Paper: The Performance of Private Equity Funds (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00120987

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