Private Equity Performance: Returns, Persistence and Capital Flows by Steve Kaplan, University of Chicago Graduate School of Business, NBER Antoinette Schoar, MIT Sloan School of Management, NBER and CEPR This paper investigates the performance of private equity partnerships using a unique data set of individual fund returns collected by Venture Economics. Over the entire sample period, the average fund returns do not exceed those of the S&P 500. At the same time, we find a large degree of heterogeneity among fund returns. Those returns persist strongly across funds by private equity partnerships. The returns also improve with firm experience. Better performing funds are more likely to raise follow-on funds and raise larger funds than more poorly performing firms. This relationship is concave so that top performing funds grow more slowly than the market average. Finally, we find that funds that are raised in boom times (and firms that are started in boom times) are less likely to raise a follow-on fund, suggesting that these funds perform worse. Several of these results differ substantially from those for mutual funds.
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