TY  - JOUR
AU  - Driessen,Joost
AU  - Lin,Tse-Chun
AU  - Phalippou,Ludovic
TI  - A New Method to Estimate Risk and Return of Non-Traded Assets from Cash Flows: The Case of Private Equity Funds
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14144
PY  - 2008
Y2  - June 2008
UR  - http://www.nber.org/papers/w14144
L1  - http://www.nber.org/papers/w14144.pdf
N1  - Author contact info:
Joost Driessen
University of Amsterdam
E-Mail: j.j.a.g.driessen@uva.nl

Tse-Chun Lin
Finance Group
Universiteit van Amsterdam
Roetersstraat 11
1018WB Amsterdam
The Netherlands
E-Mail:  T.C.Lin@uva.nl

Ludovic Phalippou
University of Amsterdam
E-Mail: L.Phalippou@uva.nl
M3  - presented at "New World of Private Equity Conference", April 4-5, 2008
AB  - We develop a new GMM-style methodology with good small-sample properties to assess the abnormal performance and risk exposure of a non-traded asset from a cross-section of cash flow data. We apply this method to a sample of 958 mature private equity funds spanning 24 years. Our methodology uses actual cash flow data and not intermediary self-reported Net Asset Values. In addition, it does not require a distributional assumption for returns. For venture capital funds, we find a high market beta and significant under-performance. For buyout funds, we find a low beta and no abnormal performance, but the sample is small. Larger funds have higher returns due to higher risk exposures and not higher alphas. We also find that Net Asset Values significantly overstate fund market values for the subset of mature and inactive funds.
ER  -