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:
Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds
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 June 2019), we confirm the previous findings on persistence overall as well as for pre-2001 and post-2000 funds. More
The Impact of Private Equity Buyouts on Productivity and Jobs
The growing importance of private equity has generated ongoing debate as to its impact on the real economy, including the impact on productivity at private equity-owned firms (referred to herein as “target firms”), as well as the impact of private equity on job growth. More
Private Equity: Accomplishments and Challenges
Since the 1980s, there has been an ongoing discussion about the role of private equity (PE) in the economy. As investors have flocked to the asset class, voices critical of the negative social impact of PE have grown louder. In this article, we examine what is known from the academic literature about the effects of private equity on corporate productivity, the returns for investors, and possible broader economic and social consequences. More
Do Private Equity Managers Have Superior Information on Public Markets?
Using cash flows from a large sample of buyout and venture funds, the author shows that private equity (PE) distributions predict returns in the industries of funds' specialization. The tests distinguish timing skill from reactions to market conditions and spillover effects of PE activity. More
Does Private Equity Ownership Make Firms Cleaner? The Role Of Environmental Liability Risks
Private equity (PE) ownership leads to a 70% reduction in the baseline rate of toxic pollution. The reduction is identified from the oil and gas industry using a nearest-neighbor research design estimated on novel satellite imaging and administrative datasets. I test several mechanisms that could explain this behavior. More
The Evolution of Private Equity Fund Value
This paper provides the first large-sample analysis of buyout and venture capital fund values over their lifetimes. Specifically, we examine interim fund investment multiples (TVPIs), internal rates of return (IRRs), and direct-alphas based on the current reported net asset values (NAVs) at each quarter of a fund’s life. More
Private Real Estate Returns, Style Drift, and Procyclical Risk Taking
This paper documents that development exposure is an important determinant of private real estate returns and market risk exposure. It also documents that open-end private real estate funds have time-varying, procyclical market risk exposure through their development activities. More
A First Look at the Impact of COVID19 on Commercial Real Estate Prices: Asset Level Evidence
This paper examines the impact of the COVID-19 pandemic on commercial real estate prices. We construct a novel measure of real estate investment trusts’ (REITs’) exposure to the growth in COVID-19 cases at the asset level. We document a negative relationship between this geographically weighted case growth and risk-adjusted returns. More
Nowcasting Net Asset Values: The Case of Private Equity
We apply advances in analysis of mix frequency and sparse data to estimate \unsmoothed" private equity (PE) Net Asset Values (NAVs) at the weekly frequency for individual funds. Using simulations and a large sample of buyout and venture funds, we show that our method yields superior estimates of fund asset values than a simple approach based on comparable public asset and as-reported NAVs. Our method easily accommodates additional data on PE fund portfolios, such as individual holdings, relevant mergers and acquisitions, secondary trades with fund stakes; extends to other illiquid portfolios that are subject to appraisal bias while generating irregular and infrequent cash flows. More
Determinants of International Buyout Investments
Using a comprehensive and proprietary data set on inter-national private equity activity, this paper studies the determinants of buyout investments across 61 countries and 19 industries over 1990–2017. The study finds evidence that macroeconomic conditions, development of stock and credit markets, and the regulatory environment in a country are important drivers of international buyout capital flows. The paper shows that countries with low unemployment, more active stock and credit markets, and better rule of law receive more buyout capital. A difference-in-differences approach is used to explore the regulatory reforms some countries have adopted over the sample period. The find-ings are that countries receive significantly more buyout capital following investor protection and contract enforce-ment reforms. The impact of regulatory reform is more pronounced in countries with better corporate governance standards and education. Buyout investment responds to these factors more so than foreign direct investment and gross domestic fixed investment. More