The Ability to NAV Time Interval Funds
NAV timing investors could potentially create trading strategies which would systematically transfer wealth from buy-and-hold investors to themselves.
Is There A Bubble In Private Credit?
While the media headlines are preaching doom, the fundamentals are telling a very different story—credit spreads have widened, and EBITDA multiples are the lowest they have been in a decade. The bottom line is that for investors able to accept its limited liquidity, private, senior, secured and sponsored by private equity direct lending continues to be a compelling component of a diversified portfolio deliver what has always attracted investors: high current income, resilience through market cycles, and a disciplined approach to risk management. We are far from a bubble.
Private Credit: Upper Versus Lower Middle Market Lending
Given the similar net returns that UMM and LMM loans have delivered, allocators should consider diversifying across borrower size cohorts. Since LLM loans are somewhat riskier, careful due diligence should be performed in terms of a lender’s credit loss history, fees/expenses, and use of leverage.
Private Equity Versus Public Equity Returns
Cliffwater found that private equity allocations by state pensions produced a 11.0% net-of-fee annualized return over the 23-year period ending June 30, 2023. Over the same period the CRSP 1-10 Index (U.S. total market) returned 7.2% and the MSCI All Country World ex USA Index returned 4.4%.
The Explosive Growth of Private Credit: Is There a Bubble?
The growth rate of private credit has been so rapid (growing to nearly $2 trillion by the end of 2023, roughly ten times larger than it was in 2009), that concerns about there being a bubble have been raised.
Accessing Private Markets: What Does It Cost?
By quantifying how non-performance-based fees dominate the cost structure, this research questions whether current fee models effectively align with investor interests, which could influence future fee arrangements and industry standards.
The Economics of Private Equity
The paper examines key factors that influence the performance and success of private equity investments. Specifically, it focuses on the importance of manager selection, the role of LP sophistication and skill, the relationship between fund size and performance, the potential misalignment of incentives between GPs and LPs, and the benefits and risks associated with co-investment opportunities.
Evergreen Private Equity Funds Attracting Assets
Evergreen funds are a relatively new concept in the private equity (PE) world compared to traditional closed-end funds. They were introduced to address the negatives of the traditional way to invest in private equity which had been in the form of partnerships.
The Impact of Amortizing Volatility across Private Investments
The amortization of volatility should be of concern for private capital asset classes. In order to properly budget for beta risks, it is critical that investors in private assets understand the amount of systemic (beta) risk that will “wash” into their private portfolios.
Private Equity May Not Be the Diversifier We Think (Due to Volatility Laundering), But Private Credit Could Be
Volatility laundering causes the risk-adjusted returns and the diversification benefits of private equity to be significantly overstated. However, the problem of volatility laundering is not a problem for all private investments, specifically not for high-quality, floating rate, private credit.
Fee Variation in Private Equity
Given the significant growth of investment in private markets, there have been increasing demands for greater transparency in the operation and structure of private market funds. This paper aims to address questions such as whether fees are set uniformly within most funds, and if not, by how much do they vary.
Private Equity Performance Around the Globe
This study provides valuable insights into how private equity performs in regions outside North America, reflecting broader trends in global investment.
The Performance of Major Private Equity/LBO Firms
The claims of superior risk-adjusted performance by the PE industry are exaggerated. Given their lack of liquidity, opaqueness, and greater use of leverage, it seems logical that investors should demand something like a 3-4% IRR premium. Yet, there is no evidence that the industry overall has been able to deliver that.
The Performance of Listed Private Equity
It is important to diversify the risks of private equity. This is best achieved by investing indirectly through a private equity fund rather than through direct investments in individual companies. Because most such funds typically limit their investments to a relatively small number, it is also prudent to diversify by investing in more than one fund. Unfortunately, the evidence we reviewed suggests that diversifying by investing in LPEs is not an effective strategy. And finally, top-notch funds are likely closed to most individual investors.
Expected Returns for Private Equity Will Probably Suck
The illiquid nature of the asset class makes the demystifying of private equity returns difficult to achieve under any circumstances, but the framework presented in this article should move the reader closer to the goal.
Asset Allocation and Private Market (i.e. illiquid) Investing
Allocations to illiquid assets have become increasingly popular requiring asset managers to consider portfolio-wide liquidity characteristics. Although determining the price of illiquidity is a challenge for investors, the construction of a portfolio that includes liquidity constraints can be even more daunting. How do we optimize asset allocation with liquidity as a significant constraint on the portfolio?
Private Equity: Is There Anything Special There?
As the following table demonstrates, since its inception in the 1970s, the private equity industry has grown significantly. According to Preqin data, there are now [...]
Gender Gaps in Venture Capital Performance
Gender Gaps in Venture Capital Performance Gompers, Mukharlyamov, Weisburst, and XuanJournal of Financial and Quantitative Analysis, 2020A version of this paper can be found hereWant to [...]
Mutual fund investments in private firms
Mutual fund investments in private firms Sungjoung Kwon, Michelle Lowry, Yiming QianJournal of Financial EconomicsA version of this paper can be found hereWant to read our [...]