Working Paper: NBER ID: w28109
Authors: Robert S. Harris; Tim Jenkinson; Steven N. Kaplan; Ruediger Stucke
Abstract: We present new evidence on the persistence of U.S. private equity (buyout and venture capital) funds using cash-flow data sourced from Burgiss’s large sample of institutional investors. Previous research, studying largely pre-2000 data, finds strong persistence for both buyout and venture capital (VC) firms. Using ex post or most recent fund performance (as of June2019), we confirm the previous findings on persistence overall as well as for pre-2001 and post-2000 funds. However, when we look at the information an investor would actually have – previous fund performance at the time of fundraising rather than final performance – we find little or no evidence of persistence for buyouts, both overall and post-2000. For post-2000 buyouts, the conventional wisdom to invest in previously top quartile funds does not hold. Using previous fund PME at fundraising, we find modest persistence, but it is driven by bottom, not top quartile performance. On the other hand, persistence for VC funds persists even when using information available at the time of fundraising. Therefore, the conventional wisdom of investors holds for VC.
Keywords: No keywords provided
JEL Codes: G11; G24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Previous fund PME (G23) | Subsequent performance (Y20) |
| Previous fund quartile rankings (G23) | Subsequent performance (Y20) |
| Performance at the time of fundraising (D29) | Performance persistence for buyout funds (G19) |
| Performance at the time of fundraising (D29) | Performance persistence for venture capital funds (G11) |
| Post-2000 vintages (B20) | Performance persistence for buyout funds (G19) |
| Bottom quartile performance (D29) | Modest persistence for buyout funds (G19) |