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Private Equity Performance: What Do We Know?

Author

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  • ROBERT S. HARRIS
  • TIM JENKINSON
  • STEVEN N. KAPLAN

Abstract

type="main"> We study the performance of nearly 1,400 U.S. buyout and venture capital funds using a new data set from Burgiss. We find better buyout fund performance than previously documented—performance has consistently exceeded that of public markets. Outperformance versus the S&P 500 averages 20% to 27% over a fund's life and more than 3% annually. Venture capital funds outperformed public equities in the 1990s, but underperformed in the 2000s. Our conclusions are robust to various indices and risk controls. Performance in Cambridge Associates and Preqin is qualitatively similar to that in Burgiss, but is lower in Venture Economics.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:jfinan:v:69:y:2014:i:5:p:1851-1882
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    File URL: http://hdl.handle.net/10.1111/jofi.12154
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    References listed on IDEAS

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    1. Ludovic Phalippou & Oliver Gottschalg, 2009. "The Performance of Private Equity Funds," Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1747-1776, April.
    2. Alexander Ljungqvist & Matthew Richardson, 2003. "The cash flow, return and risk characteristics of private equity," NBER Working Papers 9454, National Bureau of Economic Research, Inc.
    3. Narasimhan Jegadeesh & Roman Kräussl & Joshua M. Pollet, 2015. "Risk and Expected Returns of Private Equity Investments: Evidence Based on Market Prices," Review of Financial Studies, Society for Financial Studies, vol. 28(12), pages 3269-3302.
    4. Steven N. Kaplan & Per Stromberg, 2009. "Leveraged Buyouts and Private Equity," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 121-146, Winter.
    5. Michael Ewens & Charles M. Jones & Matthew Rhodes-Kropf, 2013. "The Price of Diversifiable Risk in Venture Capital and Private Equity," Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 1854-1889.
    6. Josh Lerner & Antoinette Schoar & Wan Wongsunwai, 2007. "Smart Institutions, Foolish Choices: The Limited Partner Performance Puzzle," Journal of Finance, American Finance Association, vol. 62(2), pages 731-764, April.
    7. Andrew Metrick, 2010. "The Economics of Private Equity Funds," Review of Financial Studies, Society for Financial Studies, vol. 23(6), pages 2303-2341, June.
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    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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