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Interim Valuations, Predictability, and Outcomes in Private Equity

Author

Listed:
  • Ege Y. Ercan
  • Steven N. Kaplan
  • Ilya A. Strebulaev

Abstract

Using a novel dataset of U.S. buyout and VC investments, we study the informativeness of fund managers’ interim valuation reports about portfolio companies on final outcomes. We find that when investors assess the performance of individual portfolio companies, they can do better than just relying on the most recent reported valuation. The history of reported valuations is also informative. Investments with greater past staleness or more frequent markdowns tend to perform more poorly in the future than other investments. We also find that the timing of an investment’s exit is predictable. Moreover, the combined knowledge of interim realized and unrealized returns, past staleness, and past markdown frequency can help predict whether an investment will end up in the left or right tail of all investments. These predictions are informative as early as the first year of the investment.

Suggested Citation

  • Ege Y. Ercan & Steven N. Kaplan & Ilya A. Strebulaev, 2025. "Interim Valuations, Predictability, and Outcomes in Private Equity," NBER Working Papers 33637, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33637
    Note: CF
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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