Working Paper: NBER ID: w26755
Authors: Gregory Brown; Robert S. Harris; Wendy Hu; Tim Jenkinson; Steven N. Kaplan; David T. Robinson
Abstract: Private equity performance, both for buyouts and venture capital, has been highly cyclical: periods of high fundraising have been followed by periods of low performance. Despite this seemingly predictable variation, we find modest gains, at best, to pursuing realistic, investable strategies that time capital commitments to private equity. This occurs, in part, because investors can only time their commitments to funds; they cannot time when commitments are called or when investments are exited. There is a high degree of time-series correlation in net cash flows even across commitment strategies that allocate capital in a very different manner over time.
Keywords: Private Equity; Investment Timing; Performance Cycles
JEL Codes: G23; G24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high fundraising (I22) | low performance (D29) |
| high fundraising (I22) | low performance in venture capital (G24) |
| timing strategies (C41) | modest performance gains (D29) |
| commitment strategies do not alter timing of cash flows (D25) | complicates relationship between performance and capital commitments (D29) |
| GPs' decisions (D91) | limits effectiveness of timing strategies (C41) |