Monthly Archives: January 2006

Private Equity Performance

Private Equity Performance: Returns, Persistence and Capital Flows

STEVEN N. KAPLAN, ANTOINETTE SCHOAR

Abstract
This paper investigates the performance of private equity partnerships using a data set of individual fund returns collected by Venture Economics. Over the sample period, average fund returns net of fees approximately equal the S&P 500 although there is a large degree of heterogeneity among fund returns. Returns persist strongly across funds raised by individual private equity partnerships. The returns also improve with partnership experience. Better performing funds are more likely to raise follow-on funds and raise larger funds than funds that perform poorly. This relationship is concave so that top performing funds do not grow proportionally as much as the average fund in the market. At the industry level, we show that market entry in the private equity industry is cyclical. Funds (and partnerships) started in boom times are less likely to raise follow-on funds, suggesting that these funds subsequently perform worse. Aggregate industry returns are lower following a boom, but most of this effect is driven by the poor performance of new entrants, while the returns of established funds are much less affected by these industry cycles. Several of these results differ markedly from those for mutual funds.

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The Economist on population aging in Japan

Greying Japan

The downturn
Jan 5th 2006 | TOKYO
From The Economist print edition

But ageing employees need not be a problem, if companies adjust
JAPAN’S population is in decline. As of last October 1st, the government announced last week, giving the results of its latest five-yearly census, Japan’s 127m-odd population was 19,000 fewer than a year earlier. Deaths had outstripped births for the first time in a period of peace since records have been kept. A falling population, the Yomiuri Shimbun duly wailed, meant that national survival was at stake. It may have a point: with no change in the current fertility rate–below 1.3 children per woman of child-bearing age–the last Japanese will die as soon as 2800.

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