Under the hood: Ground breaking private equity study examines actual investments, not just funds
| Aug 30th, 2010 | Filed under: Academic Research, Private Equity, Today's Post | By: Alpha Male |
|
Last December, after a particularly tough year during which liquidity was only beginning to drip back into markets, the Harvard Endowment was faced with a quandary that affected hundreds of other endowments across the United States – sell illiquid investments like private equity at a discount or borrow money to shore up its liquidity position. Harvard eventually chose to borrow – issuing $1.5 billion of bonds. Long hailed as the ideal investment for the “long term” investor, illiquid alternative investments are now blamed for precipitating the worst year on record for university endowments. So much for the “Yale Model”, right?
Maybe not. While it makes a lot of intuitive sense that private equity fund returns benefit from the relative illiquidity of that asset class, no academic study has apparently ever documented the role of illiquidity in the returns of individual private equity plays (i.e. not of the funds, but of the individual investments made by those funds and directly by institutional investors).
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
Related Posts
- Unique research study reveals private equity managers’ actual “skin in the game”
- Study reveals Achilles heel of mega private equity funds
- Study finds private equity differs markedly across Asia
- Study: Private equity managers’ incentives may be twice as high a previously thought
- Private equity funds-of-funds facing many of the same concerns as their hedge fund cousins
