Valuing Private Equity

• 成果类型: Article
• 署名作者: Sorensen, Morten; Wang, Neng; Yang, Jinqiang
• 署名单位: Columbia University; National Bureau of Economic Research; Shanghai University of Finance & Economics
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhu013
• 发表日期: 2014
• 页码: 1977
• 关键词: HIGH-WATER MARKS; corporate-debt; performance; RISK; consumption; persistence; INVESTMENT; return; income

摘要

We investigate whether the performance of private equity (PE) investments is sufficient to compensate investors (LPs) for risk, long-term illiquidity, management, and incentive fees charged by the general partner (GP). We analyze the LPs' portfolio-choice problem and find that management fees, carried interest, and illiquidity are costly, and GPs must generate substantial alpha to compensate LPs for bearing these costs. Debt is cheap and reduces these costs, potentially explaining the high leverage of buyout transactions. Conventional interpretations of PE performance measures appear optimistic. On average, LPs may just break even, net of management fees, carry, risk, and costs of illiquidity.