NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Keith Vorkink

Finance Department
Marriott School
Brigham Young University
Office 634 TNRB
Provo, UT 84602-3113

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Brigham Young University

NBER Working Papers and Publications

November 2018Private Equity Indices Based on Secondary Market Transactions
with Brian Boyer, Taylor D. Nadauld, Michael S. Weisbach: w25207
Measuring the performance of private equity investments (buyout and venture) has historically only been possible over long horizons because the IRR on a fund is only observable following the fund’s final distribution. We propose a new approach to evaluating performance using actual prices paid for limited partner shares of funds in secondary markets. We construct indices of buyout and venture capital performance using a proprietary database of secondary market prices between 2006 and 2017. These transaction-based indices exhibit significantly higher betas and volatilities, and lower alphas than NAV-based indices built from Preqin and obtained from Burgiss. There are a number of potential uses for these indices. In particular, they provide a way to track the returns of the buyout and ventur...
July 2016The Liquidity Cost of Private Equity Investments: Evidence from Secondary Market Transactions
with Taylor D. Nadauld, Berk A. Sensoy, Michael S. Weisbach: w22404
An important cost of investing in private equity is the illiquidity of these investments. In response to this illiquidity, a secondary market for transacting stakes in private equity funds has developed. This paper uses proprietary data from a leading intermediary to understand the magnitude and determinants of transaction costs in this market. Most transactions occur at a discount to net asset value. Buyers average an annualized Public Market Equivalent (PME) of 1.023 compared to 0.974 for sellers, implying that buyers outperform sellers by a market-adjusted five percentage points annually. For the most common type of transaction, the sale of stakes in funds four to nine years old, the difference is smaller, about three percentage points. Both the discount to NAV and the difference in ...

Published: Taylor D. Nadauld & Berk A. Sensoy & Keith Vorkink & Michael S. Weisbach, 2018. "nThe liquidity cost of private equity investments: Evidence from secondary market transactions," Journal of Financial Economics, .

 
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