Keywords

private equity performance, secondary market prices, transaction-based indices

Abstract

Measuring the performance of private equity investments (buyout and venture) has historically only been possible over long horizons because the IRR on a fund is only observable following the fund’s final distribution. We propose a new approach to evaluating performance using actual prices paid for limited partner shares of funds in secondary markets. We construct indices of buyout and venture capital performance using a proprietary database of secondary market prices between 2006 and 2017. These transaction-based indices exhibit significantly higher betas and volatilities, and lower alphas than NAV-based indices built from Preqin and obtained from Burgiss. There are a number of potential uses for these indices. In particular, they provide a way to track the returns of the buyout and venture capital sectors on a quarter-to-quarter basis and to value illiquid stakes in funds.

Original Publication Citation

Private Equity Indices Based on Secondary Market Transactions (with Taylor Nadauld, Keith Vorkink, and Michael Weisbach), Journal of Finance, 2023, 78, 835-885, winner of the 2022 Q-Group Jack Treynor Prize.

Document Type

Peer-Reviewed Article

Publication Date

2018

Publisher

Journal of Finance

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Full Professor

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