The cash flow, return and risk characteristics of private equity

Alexander Ljungqvist () and Matthew Richardson

No 9454, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. We document the draw down and capital return schedules for the typical private equity fund, and show that it takes several years for capital to be invested, and over ten years for capital to be returned to generate excess returns. We provide several determining factors for these schedules, including existing investment opportunities and competition amongst private equity funds. In terms of performance, we document that private equity generates excess returns on the order of five plus percent per annum relative to the aggregate public equity market. One interpretation of this magnitude is that it represents compensation for holding a 10-year illiquid investment.

JEL-codes: G0 (search for similar items in EconPapers)
Date: 2003-01
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-fin and nep-rmg
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (115)

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