@article{d7379acdcf244fb98e382c6d64823483,
title = "What drives private equity returns? - Fund inflows, skilled GPs, and/or risk?",
abstract = "This paper analyzes the determinants of returns generated by mature European private equity funds. It starts from the presumption that this asset class is characterized by illiquidity, stickiness, and segmentation. Given this presumption, Gompers and Lerner (2000) have shown that venture deal valuations are driven by overall fund inflows into the industry that yield the putative 'money chasing deals' phenomenon. It is the aim of this paper to show that this phenomenon explains a significant part of the variation in private equity funds' returns. This is especially true for venture funds, as they are affected more by illiquidity and segmentation than buy-out funds. In the context of a WLS-regression approach the paper reports a highly significant impact of total fund inflows on fund returns. It can also be shown that private equity funds' returns are driven by GP's skills as well as stand-alone investment risk. In a bootstrapping context we can show that most of these results are quite stable.",
keywords = "Buyout, IRR, Money chasing deals phenomenon, PME, Performance measurement, Private equity funds, Venture capital",
author = "Christian Diller and Christoph Kaserer",
note = "Funding Information: The work was supported by grant number 108594 from the Flight Attendant Medical Research Institute (FAMRI) to the Johns Hopkins FAMRI Center of Excellence. The funder had no role in the study design, collection, analysis or interpretation of data, writing of the report, nor in the decision to submit the paper for publication. Funding Information: Funding for this study was provided by the Council for Economy and Work (FC-15-GRUPIN14-047), and by a Predoctoral Grant BP16071 from the Council for Education and Culture of the Principality of Asturias (Spain). The funding sources had no role in the study design, collection, analysis or interpretation of the data, in writing the manuscript, or the decision to submit the paper for publication. Funding Information: We are grateful for the encouragement and financial support of the Comisi{\'o}n Nacional de Cultura F{\'i}sica y Deporte (CONADE [National Commission of Physical Culture and Sports]), as well as of the Secretaria de Educa-ci{\'o}n P{\'u}blica [Secretariat of Public Education] and of the Secretar{\'i}a de Hacienda y Cr{\'e}dito P{\'u}blico [Secretariat of Public Treasury and Finance] del Gobierno de los Estados Unidos Mexicanos [Government of the United States of Mexico]. Funding Information: This study was supported by the Spanish Ministerio de Igualdad (MI), Instituto de la Mujer, grant IMG2009-PI040964 (EGG, IE, MS), and Ministerio de Econom{\'i}a e Innovaci{\'o}n, grant PSI2014-58004-P (AG and EG-G).",
year = "2009",
month = jun,
doi = "10.1111/j.1468-036X.2007.00438.x",
language = "English",
volume = "15",
pages = "643--675",
journal = "European Financial Management",
issn = "1354-7798",
publisher = "Wiley-Blackwell Publishing Ltd",
number = "3",
}