Estimating Private Equity Returns from Limited Partner Cash Flows

44 Pages Posted: 2 Jul 2014 Last revised: 18 Feb 2017

See all articles by Andrew Ang

Andrew Ang

BlackRock, Inc

Bingxu Chen

Columbia University - Columbia Business School, Finance

William N. Goetzmann

Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Ludovic Phalippou

University of Oxford - Said Business School

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2016

Abstract

We introduce a methodology to estimate the historical time-series of returns to investment in private equity funds. The approach requires only an unbalanced panel of cash contributions and distributions accruing to limited partners, and is robust to sparse data. We decompose private equity returns into a component due to traded factors and a time-varying private equity premium. We find strong cyclicality in private equity returns that differs according to fund type. The time-series estimates allow us to directly test theories about private equity cyclicality, and we find evidence that capital market segmentation helps to determine private equity returns.

Suggested Citation

Ang, Andrew and Chen, Bingxu and Goetzmann, William N. and Phalippou, Ludovic, Estimating Private Equity Returns from Limited Partner Cash Flows (April 5, 2016). Netspar Discussion Paper No. 06/2014-021, Saïd Business School WP 2014-8, Available at SSRN: https://ssrn.com/abstract=2460789 or http://dx.doi.org/10.2139/ssrn.2460789

Andrew Ang (Contact Author)

BlackRock, Inc ( email )

55 East 52nd Street
New York City, NY 10055
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Bingxu Chen

Columbia University - Columbia Business School, Finance ( email )

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New York, NY 10027
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William N. Goetzmann

Yale School of Management - International Center for Finance ( email )

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National Bureau of Economic Research (NBER)

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Ludovic Phalippou

University of Oxford - Said Business School ( email )

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Oxford, OX1 1HP
Great Britain

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