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Style Drift in Private Equity

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  • Douglas Cumming
  • Grant Fleming
  • Armin Schwienbacher

Abstract

We introduce the concept of style drift to private equity investment. We present theory and evidence pertaining to style drifts in terms of a fund manager's stated focus on particular stages of entrepreneurial development. We develop a model that derives conditions under which style drifts are less likely among younger fund managers. We also show ways in which changes in market conditions can affect style drifts, and differences for funds committed to early‐stage investments compared to funds committed to late‐stage investments. We find some evidence of a positive relation between style drifting and investment performance.

Suggested Citation

  • Douglas Cumming & Grant Fleming & Armin Schwienbacher, 2009. "Style Drift in Private Equity," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(5‐6), pages 645-678, June.
    • Handle: RePEc:bla:jbfnac:v:36:y:2009:i:5-6:p:645-678
    DOI: 10.1111/j.1468-5957.2009.02137.x
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