Estimating Private Equity Returns from Limited Partner Cash Flows

Phalippou, Ludovic, Ang, Andrew, Goetzmann, William and Chen, Bingxu (2018) Estimating Private Equity Returns from Limited Partner Cash Flows. Journal of Finance, 73 (4). pp. 1751-1783.

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We introduce a methodology to estimate the historical time series of returns to investment in private equity. The approach is quite general, requires only an unbalanced panel of cash contributions and distributions accruing to limited partners, and is robust to sparse data. We decompose private equity returns into a component due to traded factors and a time-varying private equity premium. We find strong cyclicality in the premium component that differs according to fund type. The time-series estimates allow us to directly test theories about private equity cyclicality, and we find evidence in favor of the Kaplan and Strömberg (2009) hypothesis that capital market segmentation helps to determine the private equity premium.

Item Type: Article
Keywords: investment; private equity; finance
Subject(s): Finance
Date Deposited: 31 Jul 2017 09:52
Last Modified: 04 Oct 2018 10:37
Funders: N/A

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