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Revisiting private equity performance computation for multi-asset investors

Author

Listed:
  • Edouard Nouvellon

    (Université Libre de Bruxelles)

  • Hugues Pirotte

    (Université Libre de Bruxelles)

Abstract

Private equity has increasingly been used in portfolio for all types of investors as family offices or ultra-high net worth individuals. Financial literature proposes different ways to compute private equity performances with results that can question the promised over-performance on public equities. The investment process in private equity funds with the system of committed capital and called capital can have a huge impact of the private equity performance in the whole portfolio and in multi-assets framework. This paper proposes an empirical study that integrates the J-curve effect on the private equity part of a portfolio and its scaling effect with the low-rate environment.

Suggested Citation

  • Edouard Nouvellon & Hugues Pirotte, 2019. "Revisiting private equity performance computation for multi-asset investors," Journal of Asset Management, Palgrave Macmillan, vol. 20(6), pages 421-432, October.
    • Handle: RePEc:pal:assmgt:v:20:y:2019:i:6:d:10.1057_s41260-019-00135-3
    DOI: 10.1057/s41260-019-00135-3
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    References listed on IDEAS

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    1. Robert S. Harris & Tim Jenkinson & Steven N. Kaplan, 2014. "Private Equity Performance: What Do We Know?," Journal of Finance, American Finance Association, vol. 69(5), pages 1851-1882, October.
    2. Barber, Brad M. & Yasuda, Ayako, 2017. "Interim fund performance and fundraising in private equity," Journal of Financial Economics, Elsevier, vol. 124(1), pages 172-194.
    3. Steven N. Kaplan & Antoinette Schoar, 2005. "Private Equity Performance: Returns, Persistence, and Capital Flows," Journal of Finance, American Finance Association, vol. 60(4), pages 1791-1823, August.
    4. Eileen Appelbaum & Rosemary Batt, 2016. "Are Lower Private Equity Returns the New Normal?," CEPR Reports and Issue Briefs 2016-10, Center for Economic and Policy Research (CEPR).
    5. Korteweg, Arthur & Sorensen, Morten, 2017. "Skill and luck in private equity performance," Journal of Financial Economics, Elsevier, vol. 124(3), pages 535-562.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Private equity performance; Opportunity cost of investment; General partner; Limited partner; Multi-asset investors; J-curve; Capital calls; Deposit rate; IRR; Multiple on invested capital;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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