Francesco Franzoni, Eric Nowak, Ludovic Phalippou
Jun, 01 2009
This is the first study that provides evidence of liquidity risk in a large sample of private equity investments. It relies on the realized cash flows of 4,403 liquidated investments. We find that a one standard deviation increase in unexpected aggregate liquidity raises returns between 4% and 10% annually, depending on liquidity measures. This effect is robust to controlling for investment characteristics and macroeconomic variables. Larger investments and investments from more mature private equity firms
have returns that are more sensitive to unexpected liquidity. Using the Pástor and Stambaugh (2003) traded liquidity factor, we estimate a liquidity risk premium in private equity of about 3% annually. Accounting for liquidity risk, the historical cost of capital for private equity is about 24% annually and the alpha (before fees) is close to zero.
Daniel M. Schmidt, Sascha Steffen, Franziska Szabo
Dec, 06 2007
This study focuses on buyout exits in Europe and the United States. We analyze the three main exit routes, initial public offerings (IPO), sales and write-offs on, using a unique data set for the time period 1990 through 2005...
Philipp Krohmer, Rainer Lauterbach, Victor Calanog
Aug, 14 2007
Previous papers that examined investment decisions by private equity funds are divided on whether staging has a positive or negative effect on returns. We believe these opposing views can be reconciled by studying when staging is used during the life of the investment relationship...
Philipp Krohmer
Aug, 14 2007
This study examines the investor’s decision on the exit of loss making projects. The investor faces a liquidation dilemma: follow-on financing versus terminating a loss making investment, and thereby giving up the turn-around option. I examine the role of investment experience on solving this liquidation dilemma...
Rainer Lauterbach, Isabell Welpe, Jan Fertig
Sep, 26 2006
The necessity to differentiate between good versus poor performance of venture capital and private equity investments regarding the allocation of cash flow rights and control rights is confirmed by KAPLAN/STRÖMBERG (2003). Therefore, a specific analysis of the determinants of ‘winners’ and ‘losers’ of a fund is needed and yet has so far not been performed by previous empirical research.
Benjamin Langer, Rainer Lauterbach, Isabell Welpe
Sep, 26 2006
Using a unique private equity fund dataset, we examine the antecedents and performance implications of style drift in private equity investments. For the first time, we show that drifts from an investment focus are associated with a higher IRR and that both market and fund characteristics influence the occurrence of style drift...
Victor Calanog, Rainer Lauterbach, Mark Wahrenburg
Jun, 12 2006
This study examines the effect of capital inflows into Private Equity (PE) and Venture Capital (VC) fund on their speed of capital allocation and staging behaviour...
Matthias M. Ick
Sep, 14 2005
In this paper we show how cross-sectional correlations between Private Equity (PE) and Public Market Equity (PM) returns can be approximated, despite the lack of time series PE data...
Matthias M. Ick
Sep, 14 2005
In this paper we investigate the risk return relationship of Private Equity (PE) relative to Public Market Equity (PM) investments to assess the adequateness of PE’s return premium...
Douglas Cumming, Daniel M. Schmidt, Uwe Walz
Jul, 14 2004
We analyze governance with a dataset on investments of venture capitalists in 3848 portfolio firms in 39 countries from North and South America, Europe and Asia spanning 1971-2003. We find that cross-country differences in Legality have a significant impact on the governance structure of investments in the VC industry...
Douglas Cumming, Uwe Walz
Jul, 14 2004
We study the returns of venture capital and private equity investments from 221 venture capital and private equity funds that are part of 72 venture capital and private equity firms, 5040 entrepreneurial firms (3826 venture capital and 1214 private equity), and spanning 32 years (1971 – 2003) and 39 countries from North and South America, Europe and Asia...
Daniel M. Schmidt, Mark Wahrenburg
Jul, 14 2004
The paper explores factors that influence the design of financing contracts between venture capital investors and European venture capital funds. 122 Private Placement Memoranda and 46 Partnership Agreements are investigated in respect to the use of covenant restrictions and compensation schemes...
Daniel M. Schmidt
Jul, 08 2004
In this article, we investigate risk return characteristics and diversification benefits when private equity is used as a portfolio component. We use a unique dataset describing 642 US-American portfolio companies with 3620 private equity investments...
Daniel M. Schmidt, Eric Nowak, Alexander Knigge
Mar, 10 2004
This paper investigates the market timing abilities of private equity fund managers using a unique set of detailed cash-flow data. We show that investment timing has an impact on the performance of venture capital funds...
Stefan Feinendegen, Daniel M. Schmidt, Mark Wahrenburg
Aug, 04 2003
Die vorliegende empirische Studie analysiert die Vertragsgestaltung zwischen Investoren und europäischen Venture Capital-Fonds. Im Zentrum steht die Analyse der Vergütung des Fondsmanagements sowie der zum Einsatz kommenden Vertragsklauseln...