TY  - JOUR
AU  - Ljungqvist,Alexander
AU  - Richardson,Matthew
TI  - The cash flow, return and risk characteristics of private equity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9454
PY  - 2003
Y2  - January 2003
UR  - http://www.nber.org/papers/w9454
L1  - http://www.nber.org/papers/w9454.pdf
N1  - Author contact info:
Alexander Ljungqvist
Stern School of Business
New York University
44 West Fourth Street, #9-160
New York, NY 10012
Tel: 212/998-0304
Fax: 212/995-4220
E-Mail: aljungqv@stern.nyu.edu

Matthew P. Richardson
Stern School of Business
New York University
44 West 4th Street, Suite 9-190
New York, NY 10012
Tel: 212/998-0349
Fax: 212/995-4233
E-Mail: mrichar0@stern.nyu.edu
AB  - Using a unique dataset of private equity funds over the last two decades, this paper analyzes the cash flow, return, and risk characteristics of private equity. We document the draw down and capital return schedules for the typical private equity fund, and show that it takes several years for capital to be invested, and over ten years for capital to be returned to generate excess returns. We provide several determining factors for these schedules, including existing investment opportunities and competition amongst private equity funds. In terms of performance, we document that private equity generates excess returns on the order of five plus percent per annum relative to the aggregate public equity market. One interpretation of this magnitude is that it represents compensation for holding a 10-year illiquid investment.
ER  -