Risk and expected returns of private equity investments : evidence based on market prices

  • We estimate the risk and expected returns of private equity investments based on the market prices of exchange traded funds of funds that invest in unlisted private equity funds. Our results indicate that the market expects unlisted private equity funds to earn abnormal returns of about one to two percent. We also find that the market expects listed private equity funds to earn zero to marginally negative abnormal returns net of fees. Both listed and unlisted private equity funds have market betas close to one and positive factor loadings on the Fama-French SMB factor. Private equity fund returns are positively correlated with GDP growth and negatively correlated with the credit spread. Finally, we find that market returns of exchange traded funds of funds and listed private equity funds predict changes in self-reported book values of unlisted private equity funds.

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Author:Narasimhan Jegadeesh, Roman KräusslORCiDGND, Joshua M. PolletGND
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2010,04
Series (Serial Number):CFS working paper series (2010, 04)
Document Type:Working Paper
Year of Completion:2010
Year of first Publication:2010
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2010/02/25
Tag:Funds of Funds; Listed Private Equity; Private Equity; Risk-Return Characteristics
Issue:November 2009
Page Number:50
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht