Our Research Strategy
At IPC, data, research and education improve understanding of the role of private capital in the global economy. An essential first step for generating quality research is access to reliable data. Thus, our top priority is making research-quality data sources widely available to academic researchers.
Access to data on private investments presents challenges, including confidentiality concerns, the proprietary nature of many datasets, and the diffuse nature of private investments. However, we believe that these challenges are best addressed by a deliberate systematic approach through a combined academic effort. In many cases, data owners welcome the benefits derived from confidential analysis of their data by objective academic researchers.
IPC currently focuses on three research areas:
Crowded Trades and Tail Risk
A growing body of research examines the implications of common holdings for asset price determination; however, far less is known about the impact of hedge fund ownership concentration on risk and return. Yet, hedge fund positions are an important component of the degree of crowdedness because these investment vehicles tend to be particularly active in their pursuit of out performance, they often take highly concentrated positions, and they utilize leverage and short sales. Using a large database of U.S. equity position-level holdings for hedge funds, we measure the degree of security level crowdedness. More
Commercial Real Estate as an Asset Class
We survey the properties of commercial real estate (CRE) as an asset class. We first illustrate its importance relative to the US economy and to other asset classes. We then discuss CRE ownership patterns over time. While the academic literature has emphasized Real Estate Investment Trusts (REITs), about two thirds of CRE is owner-occupied. We next study the return properties of CRE indices, indices on particular property types, and discuss what is known about the returns to individual properties. We briefly discuss CRE debt before turning to property derivatives. More
Venture Capital Contracts
We develop a dynamic search and matching model to estimate the impact of venture capital (VC) contract terms on start-up outcomes, and the split of value between entrepreneur and investor, in the presence of endogenous selection. Using a new, large data set of rst nancing rounds of start-up companies, we find an internally optimal equity split between VC and entrepreneur that maximizes the probability of success, consistent with standard double moral hazard theories. However, in virtually all deals, VCs use their bargaining power to receive more equity than is value-maximizing for the start-up. In most cases, participation rights and investor board representation reduce company value, while shifting more value to the investors. More
Can Investors Time Their Exposure to Private Equity?
We find modest gains, at best, to pursuing more realistic, investable strategies that time capital commitments to private equity. 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. More
When Investor Incentives and Consumer Interests Diverge – Private Equity in Higher Education
This paper uses private equity buyouts to study a transition from lower- to higher-powered profit-maximizing incentives in higher education. Relative to closely-held private firms or diffusely-held publicly traded firms, private equity-owned firms have particularly high-powered incentives to maximize profits (Jensen 1989). More
Performance of Private Credit Funds: A First Look
Although private credit funds have rapidly grown into a standalone asset class over the last decade, little is known about the aggregate performance of these funds. To provide a first look at absolute and relative performance, we utilize the Burgiss database of 476 private credit funds with nearly $480 billion in committed capital, including a subset of 155 direct lending funds. More
How do Financial Expertise and Networks Affect Investing? Evidence from the Governance of University Endowments
Using the unique laboratory of university endowments, we study the effects of expertise and networks on investment performance. More
Activism and Empire Building
We focus on the role of activists in the market for corporate control and provide evidence that activists curb incentives to engage in empire building acquisitions, limiting the scope of one of the most destructive forces in public companies. More
Budgeting for Capital Calls – A VaR-Inspired Approach
Investors with commitments to private capital funds need to maintain suﬃcient reserves to service capital calls arising from those funds. More
Buy Low, Sell High? Do Private Equity Fund Managers Have Market Timing Abilities?
Market timing ability is one way for investment managers to achieve high returns on managed assets. An asset class which frequently engages in buying and selling companies is private equity (PE). More