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Valuing Private Equity

We develop a dynamic valuation model of private equity (PE) investments by solving the portfolio-choice problem for a risk-averse investor (LP), who invests in a PE fund, managed by a general partner (GP). Key features are illiquidity, leverage, GP value-adding skills (alpha), and compensation, including management fees and carried interest. We find that the costs of management fees, carried interest, and illiquidity are high, and the GP needs to generate substantial value to cover these costs. Leverage substantially reduces these costs. Finally, we find that conventional interpretations of PE performance measures are optimistic. On average, LPs may just break even..Printed Journal

Ketersediaan

Call NumberLocationAvailable
RFS2707PSB lt.dasar - Pascasarjana1
Penerbit Oxford Oxford University Press.,
Edisi -
Subjek Non
Illiquidity
Private equity
Certainty
Alpha
LP portfolio choice
equivalent valuation
incomplete markets
diversifi
able risk
GP compensation
management fees
carried interest
ISBN/ISSN 8939454
Klasifikasi -
Deskripsi Fisik -
Info Detail Spesifik -
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