Research

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Private Equity Research Consortium (PERC) is a group of scholars and industry professionals that conducts and promotes research on private equity. The core mission is to develop better understanding of how private capital investments affect both financial results and broader economic outcomes. PERC was established in 2012 by scholars from the business schools at UNC, Oxford, Chicago, Virginia and other institutions who recognized challenges facing empirical research on private equity and felt they could develop a successful approach to address these.

PERC has an exclusive arrangement with Burgiss to provide access to data for academic research. The Burgiss dataset includes over 6,000 funds with over $4.0 trillion in assets. It is sourced directly from limited partners and contains full performance histories of cash flows at the fund level. This represents the largest and most in-depth dataset of its kind on venture, buyout, and real estate funds available for academic research. 

PERC supports academic studies by researchers all over the world, creating articles for publication in academic and practitioner journals, developing and testing data, and providing access to data for other scholars. PERC, a community of academic researchers organized through IPC, provides an opportunity for data collectors to make the most of their data sources and promotes knowledge creation for the industry as a whole.

IPC and PERC periodically accept applications from academic researchers for access to Burgiss private equity fund data.  The next deadline for proposal review is August 15, 2017 with a response date of August 31, 2017.  Application information is available here.

 

PERC Research Fellows

  • David Hartzell,  University of North Carolina, Kenan-Flagler Business School
  • Morten Sorensen, Columbia Business School
  • Per Stromberg, Stockholm School of Economics
  • Oleg Gredil, Tulane University

Research Papers - Private Equity

What Do Different Commercial Data Sets Tell Us About Private Equity Performance?

by Prof. Gregory Brown, Robert Harris, Tim Jenkinson, Steven Kaplan, and David Robinson
2015

This paper examines private equity (both buyout and venture funds) performance around the globe using four data sets from leading commercial sources. For North American funds, our results echo recent research findings: buyout funds have outperformed public equities over long periods of time; in contrast, venture funds saw performance fall after spectacular results for vintages in the 1990s. For funds outside North America, buyout funds show performance similar to those in North America while venture fund performance is weaker than in North America. Venture samples outside North America are, however, relatively small and strong conclusions await further research. The similarity of performance estimates across the data sets strengthens confidence in conclusions about the results of private equity investing.

Financial Intermediation in Private Equity: How Well Do Funds of Funds Perform?

by Robert Harris, Tim Jenkinson, Steven Kaplan, and Rüdiger Stucke
Darden Business School Working Paper No. 2620582 August 1, 2015

This paper focuses on funds of funds (FOFs) as a form of financial intermediation in private equity (both buyout and venture capital). Compared to investments in hedge funds or publicly traded stocks, private equity investments in direct funds are less liquid, less easily scaled and have higher search and monitoring costs. As a consequence, FOFs in private equity may provide valuable intermediation for investors who want exposure to the asset class. We benchmark FOF performance (net of their fees) against both public equity markets and strategies of direct investment into private equity funds. We also examine the types of portfolios private equity FOFs create when they pool investor capital. After accounting for fees, primary FOFs provide returns equal to or above public market indices for both buyout and venture capital. While FOFs focusing on buyouts outperform public markets, they underperform direct fund investment strategies in buyout. In contrast, the average performance of FOFs in venture capital is on a par with results from direct venture fund investing. This suggests that FOFs in venture capital (but not in buyouts) are able to identify and access superior performing funds.

How Do Private Equity Investments Perform Compared to Public Equity?

by Robert Harris, Tim Jenkinson, and Steven Kaplan
forthcoming Journal of Investment Management 2015

The merits of investing in private versus public equity have generated considerable debate, often fueled by concerns about data quality. In this paper, we use cash flow data derived from the holdings of almost 300 institutional investors to study over 1,800 North American buyout and venture capital funds. Average buyout fund returns for all vintage years but one before 2006 have exceeded those from public markets; averaging about 3% to 4% annually. Post-2005 vintage year returns have been roughly equal to those of public markets. We find similar performance results for a sample of almost 300 European buyout funds. Venture capital performance has varied substantially over time. North American venture funds from the 1990s substantially outperformed public equities; those from the early 2000s have underperformed; and recent vintage years have seen a modest rebound. The variation in venture performance is significantly linked to capital flows: performance is lower for funds started when there are large aggregate inflows of capital to the sector. We also examine the variation in performance of funds started in the same year. We find marked differences between venture and buyout leading to a much more pronounced impact of accessing high performing funds in venture investing.

Private Equity Performance: What Do We Know?

by Robert Harris, Tim Jenkinson, and Steven Kaplan
Journal of Finance Issue 69 No.5 2014

Prior research on the performance of private equity investing (including both buyout and venture capital funds) has led to mixed conclusions. This is perhaps not surprising given concerns about the lack of high quality data for research. For instance, some private equity (PE) data sets rely on voluntary reporting by funds or on Freedom of Information Act requests which may result in biased samples and incomplete data. We use a new research-quality data set of PE fund-level cash flows from Burgiss. The data are derived entirely from institutional investors (the limited partners) for whom Burgiss’ systems provide record-keeping and performance monitoring services. This feature results in detailed, verified, and cross-checked investment histories for nearly 1,400 PE funds derived from the holdings of over 200 institutional investors. Our research highlights the importance of high quality data for understanding PE and the returns it provides to investors. Here we focus on results using the public market equivalent (PME) method of Kaplan-Schoar (JF 2005). PME is a market-adjusted multiple which compares how much a 2 PE fund investor actually earned net of fees to what the investor would have earned in an equivalent investment in the public market. A PME above 1.0 signals higher returns to private compared to public equity. After summarizing conclusions, we present key empirical results.

Do Private Equity Funds Game Returns?

by Prof. Gregory Brown, Steven Kaplan, and Oleg Gredil
Working Paper 2014

By their nature, private equity funds hold assets that are hard to value. This uncertainty in asset valuation gives rise to the potential for fund managers to manipulate reported net asset values (NAVs). Managers may have an incentive to game valuations in the short-run if these are used by investors to make decisions about commitments to subsequent funds managed by the same firm. Using a large dataset of buyout and venture funds, we test for the presence of reported NAV manipulation. We find evidence that some managers boost reported NAVs during times that fundraising activity is likely to occur. Those managers, however, are subsequently unable to raise a next fund, suggesting that investors see through the manipulation. In contrast, we find that top-performing funds under-report returns. This conservatism is consistent with these firms insuring against future bad luck that could make them appear as though they are NAV manipulators. Our results are robust to a variety of specifications and alternative explanations.

Has Persistence Persisted in Private Equity Evidence From Buyout and Venture Capital Funds

by Robert Harris, Tim Jenkinson, Steven Kaplan, and Rüdiger R. Stucke, Ph.D.
Working Paper 2014

The conventional wisdom for investors in private equity funds is to invest in partnerships that have performed well in the past. This is based on the belief that performance in private equity persists across funds of the same partnership. We present new evidence on the persistence of U.S. private equity (buyout and venture capital) funds using a research-quality dataset from Burgiss, sourced from over 200 institutional investors. Relying on detailed cash-flow data for funds, we study the persistence of buyout and venture capital fund performance of the same general partners across different funds. We pay particular attention to persistence pre- and post-2000. Previous research, studying largely pre-2000 data, has found strong persistence for both buyout and venture capital firms. We confirm the previous findings on persistence in pre-2000 funds. There is persistence for buyout funds and, particularly, for venture funds. Post-2000, we find little evidence of persistence for buyout funds, except at the lower end of the performance distribution. When funds are sorted by the quartile of performance of their previous funds, performance of the current fund is statistically indistinguishable regardless of quartile. Performance for partnerships in all previous fund quartiles exceeds those of public markets as measured by the S&P 500. Regression results confirm the absence of persistence post-2000 except for funds in the lower end of the performance distribution. Post-2000, we find that performance in venture capital funds remains as persistent as pre-2000. Partnerships whose previous venture capital funds are below the median for their vintage year subsequently tend to be below median and have returns below those of the public markets (S&P 500). Partnerships in the top two quartiles tend to stay above the median and their returns exceed those of the public markets.

Condensed version: Performance Persistence in Private Equity, March 2014
http://areas.kenan-flagler.unc.edu/finance/PERC/HJKS%20persistence%20shorter%20paper.pdf

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