Interim Valuations, Predictability, and Outcomes in Private Equity

Ege Y. Ercan, Steven N. Kaplan and Ilya A. Strebulaev

No 33637, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a novel dataset of U.S. buyout and VC investments, we study the informativeness of fund managers’ interim valuation reports about portfolio companies on final outcomes. We find that when investors assess the performance of individual portfolio companies, they can do better than just relying on the most recent reported valuation. The history of reported valuations is also informative. Investments with greater past staleness or more frequent markdowns tend to perform more poorly in the future than other investments. We also find that the timing of an investment’s exit is predictable. Moreover, the combined knowledge of interim realized and unrealized returns, past staleness, and past markdown frequency can help predict whether an investment will end up in the left or right tail of all investments. These predictions are informative as early as the first year of the investment.

JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2025-04
Note: CF
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