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The Truth About Private Equity Performance

Author

Listed:
  • Oliver Gottschalg

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Ludovic Phalippou

Abstract

The article reports that calculating the performance of private equity funds with a modified internal rate of return (M-IRR) results in a more accurate performance yield or true return. The problem with the internal rate of return (IRR) method is that IRR overstates the fund's performance and misrepresents its relative ranking, which misleads investors about the reinvestment of cash proceeds and makes it difficult to compare fund managers. An example is given showing how M-IRR better represents the rate of return for private equity funds.

Suggested Citation

  • Oliver Gottschalg & Ludovic Phalippou, 2007. "The Truth About Private Equity Performance," Post-Print hal-00458707, HAL.
    • Handle: RePEc:hal:journl:hal-00458707
    DOI: 10.1225/F0712D
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    Cited by:

    1. de la Parra, I. & Muñoz, M. & Lorenzo, E. & García, M. & Marcos, J. & Martínez-Moreno, F., 2017. "PV performance modelling: A review in the light of quality assurance for large PV plants," Renewable and Sustainable Energy Reviews, Elsevier, vol. 78(C), pages 780-797.

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    Keywords

    Private equity funds; Performance;

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