Discount-Rate Risk in Private Equity: Evidence from Secondary Market Transactions

• 成果类型: Article
• 署名作者: Boyer, Brian H.; Nadauld, Taylor D.; Vorkink, Keith P.; Weisbach, Michael S.
• 署名单位: Brigham Young University; University System of Ohio; Ohio State University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13202
• 发表日期: 2023
• 页码: 835-885
• 关键词: LIMITED PARTNER PERFORMANCE; INVESTMENTS EVIDENCE; sample selection; returns; heteroskedasticity

摘要

Measures of private equity (PE) performance based on cash flows do not account for a discount-rate risk premium that is a component of the capital asset pricing model (CAPM) alpha. We create secondary market PE indices and find that PE discount rates vary considerably. Net asset values are too smooth because they fail to reflect variation in discount rates. Although the CAPM alpha for our index is zero, the generalized public market equivalent based on cash flows is large and positive. We obtain similar results for a set of synthetic funds that invest in small cap stocks. Ignoring variation in PE discount rates can lead to a misallocation of capital.