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:
Investment with Social Impact: Evidence from Commercial Real Estate Investment by Public Pension Funds
This paper studies whether and how investments by public pension funds result in a different social impact, measured by employment growth, relative to investments by other large investors. Using commercial real estate (CRE) investments as a laboratory, I compare direct pension fund CRE investments to a counterfactual of real estate private equity (REPE) CRE investments. More
How Do Financial Expertise and Networks Affect Investing? Evidence from University Endowments
We examine the links between human capital and endowment investing. Harnessing detailed information on university endowments, we find that higher asset allocations to alternative assets accompany higher levels of human capital in the endowment’s investment process. Moreover, high levels of human capital are linked to larger returns, even on a risk-adjusted basis. More
Hedge Funds and the Treasury Cash-Futures Disconnect
We document the rise and fall of an arbitrage trade among hedge funds known as the Treasury cash-futures basis trade. This trade exploited a fundamental disconnect between cash and futures prices of Treasuries. We show that in recent years a replicating portfolio of Treasury bills and futures has been overvalued relative to Treasury notes and bonds, creating an opportunity for arbitrageurs. More
The Hedge Fund Industry is Bigger (and has Performed Better) Than You Think
Of first-order importance to the study of potential systemic risks in hedge funds is the aggregate size of the industry. The worldwide hedge fund industry has been estimated by regulators and industry experts as having total net assets under management of $2.3–3.7 trillion as of the end of 2016. More
Job Growth from Opportunity Zones
The Tax Cuts and Jobs Act of 2017 established a new program called Opportunity Zones (OZs) that created tax advantages for investing in businesses or real estate in a limited number of low-income Census tracts. We use a census of establishment-level data on employment to identify the effect of the program on job creation. More
Private Investments in Diversified Portfolios
We study the impact of including private investment funds into diversified portfolios that otherwise hold only public stocks and bonds. Our analysis uses a large sample of 3,380 U.S. buyout, venture capital, and real estate funds to simulate portfolios from 1987 to 2018 that substitute part of the public equity allocation with private funds. More
Valuing Private Equity Investments Strip by Strip
We propose a new valuation method for private equity investments. It constructs a replicating portfolio using cash-flows on various listed equity and fixed income instruments (strips). It then values the listed strips using an asset pricing model that accurately captures the risk in the cross-section of bonds and equity factors. More
Debt and Leverage in Private Equity: A Survey of Existing Results and New Findings
This paper examines leverage and debt financing in the private equity buyout market. We provide an overview of how debt is utilized in buyout investment structures and a review of existing theoretical and empirical academic literature. The analysis also includes results from new data sources with information on deal structure and performance since the global financial crisis (GFC). We document that leverage ratios (Net Debt / EBITDA) have increased substantially in recent years and the increase is even more pronounced after unwinding EBITDA “adjustments” which have become increasingly large. More
Should defined contribution plans include private equity investments?
Investors want access to the best performing assets for their portfolios. Driven by the strong performance of private investment funds in recent decades, many providers of defined-contribution (DC) investment services have advocated for broader access to private investments in these plans, such as 401(k)s. More
Do Private Equity Investors Create Value? Evidence from the Hotel Industry∗
We dissect possible mechanisms of private equity (PE) value creation by studying the U.S. hotel industry. We observe acquisitions, dispositions, and granular operating performance data for several thousand hotels owned by PE and non-PE investors over the past two decades. More