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Title: Skill and Luck in Private Equity Performance
Originating Office: IAS
Speaker: Sorensen, Morten
Issue Date: 4-Dec-2014
Event Date: 4-Dec-2014
Group/Series/Folder: Record Group 8.15 - Institute for Advanced Study
Series 3 - Audio-visual Materials
Location: 8.15:3 EF
Notes: IAS Conference on Entrepreneurship and Finance. Talk no.3
'IAS Conference on Entrepreneurship and Finance, paper presentation I.'
Title from event program.
IAS Conference on Entrepreneurship and Finance, held 4 Dec., 2014, at the Hong Kong University of Science and Technology. Sponsor, HKUST Jockey Club Institute for Advanced Study, and co-sponsor by Center for Asian Financial Markets, Department of Finance, HKUST.
Abstract: We evaluate the performance of private equity (PE) funds using a variance decomposition model that separates long-term, investable, and spurious persistence. We find a large amount of long-term persistence: the spread in the expected returns of top-and bottom-quartile PE firms is 7 to 8 percentage points annually. Performance is noisy, however, and top-quartile past performance does not imply top-quartile expected future returns, especially for VC firms. Based on past performance alone, an investor needs to observe an excessive number of funds to identify the PE firms with top-quartile expected returns, implying low investable persistence.
Duration: 33 min.
Appears in Series:8.15:3 - Audio-visual Materials
Videos for Public -- Distinguished Lectures