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Private Equity: Strategies for Improving Performance

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Abstract

Existing research suggests the average private equity* manager does not create excess returns over public markets net of fees. We confirm this result using a factor model that allows for leverage, illiquidity and volatility clustering. The model explains 70 to 90 per cent of the variation in returns. Our model also gives rise to two methods of improving conventional private equity performance via a synthetic exposure. We test the robustness of the synthetic methods using historical and simulated data.

Suggested Citation

  • Ron Bird & Harry Liem & Susan Thorp, 2011. "Private Equity: Strategies for Improving Performance," Working Paper Series 12, The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney.
    • Handle: RePEc:uts:pwcwps:12
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    Cited by:

    1. Ron Bird & Harry Liem & Susan Thorp, 2014. "Infrastructure: Real Assets and Real Returns," European Financial Management, European Financial Management Association, vol. 20(4), pages 802-824, September.

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    More about this item

    Keywords

    buyouts; venture capital; conditional overlay; GARCH;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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