Valuing Private Equity Investments Strip by Strip

• 成果类型: Article
• 署名作者: Gupta, Arpit; Van Nieuwerburgh, Stijn
• 署名单位: New York University; Columbia University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13073
• 发表日期: 2021
• 页码: 3255-3307
• 关键词: term structure; RISK; performance; return; arbitrage; skill; funds; FLOWS; luck

摘要

We propose a new valuation method for private equity (PE) investments. It constructs a replicating portfolio using cash flows on listed equity and fixed-income instruments (strips). It then values the strips using an asset pricing model that captures the risk in the cross-section of bonds and equity factors. The method delivers a risk-adjusted profit on each PE investment and a time series for the expected return on each fund category. We find negative risk-adjusted profits for the average PE fund, with substantial heterogeneity and some persistence in the performance. Expected returns and risk-adjusted profit decline in the later part of the sample.