What drives cash flow based European private equity returns? Fund inflows, skilled GPs and/or risk?

Arbeitspapier

This paper analyzes the determinants of returns generated by European private equity funds. It starts from the presumption that this asset class is characterized by illiquidity, stickiness and segmentation. As a consequence, Gompers and Lerner (2000) have shown that venture deal valuations are driven by overall fund inflows into the industry giving way to the so called 'money chasing deals' phenomenon. It is the aim of this paper to document that this phenomenon also explains a significant part of variation in private equity funds' returns. This is especially true for venture funds, as they are more affected by illiquidity and segmentation than buy-out funds. Actually, the paper presents a WLS-regression model that is able to explain up to 47% of variation in funds' returns. Apart from the importance of fund flows we can also show that market sentiment, the GPs' skills as well as the idiosyncratic risk of a fund have a significant impact on its returns. Moreover, they seem to be unrelated to stock market returns and negatively correlated with the development of the economy as a whole. According to a bootstrapping inference the results seem to be quite stable.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Working Paper ; No. 2004-02

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
• Thema: private equity funds ; venture capital ; financing ; WLS ; bootstrapping

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kaserer, Christoph ; Diller, Christian
• Ereignis: Veröffentlichung
• (wer): Technische Universität München, Center for Entrepreneurial and Financial Studies (CEFS)
• (wo): München
• (wann): 2004

Weitere Informationen

• Handle: http://hdl.handle.net/10419/48536
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ