Tag: listed private equity

PE Market Dynamics: Beyond the Surface

Posted on | by Hammad

This study examines return and volatility spillovers between different regional private equity markets and investment styles to analyze the dynamics of connectedness. Using the LPX Group’s listed private equity indices from 2004 to 2023, we find significant fluctuations in return and volatility spillovers over time, with peaks occurring during major financial events. Notably, the peaks in the volatility spillovers are more abrupt but less persistent than those in the return spillovers. Our analysis reveals no direct correspondence between return and volatility spillovers, suggesting that they measure different aspects that should be considered in active portfolio management. The LPX America index is a net transmitter for the LPX Europe index, except during specific European events. In addition, the LPX Buyout index is identified as a consistent net transmitter of return spillovers, whereas the LPX Mezzanine index shows higher net volatility spillovers. Conversely, the LPX Venture index is consistently a net receiver, highlighting its diversification potential for both private equity and traditional stock market investors. These findings provide essential insights into portfolio allocation, risk management, and strategic planning in private equity investing.

Authors: Antonio Diaz, Carlos Esparcia, Lars Tegtmeier
Publication date: 2 April 2025
Published in:International Review of Economics & Finance
Volume/ Ausgabe: 
Source download link: https://www.sciencedirect.com/science/article/pii/S1059056025002503

Mit liquiden Bausteinen die Private Equity Performance konstruieren

Posted on | by Robin Jakob

Private equity is often favored over stocks by investors due to its higher returns and lower volatility. However, stocks can sometimes outperform private equity, especially when leveraging legal skew, leverage, and volatility tolerance. While private equity funds provide attractive returns with less market fluctuation, the rise in interest rates and reduced deal-making activity have impacted their performance. Some investors now view liquid equity investments, like those in listed private equity indices, as a viable alternative, offering benefits of both private equity and stock market exposure, with lower fees and greater liquidity.

Authors: Patrick Eisele
Publication date: 30 September 2024
Published in: portfolio institutionell
Volume/ Ausgabe: 2024, 9
Source download link: https://www.portfolio-institutionell.de/mit-liquiden-bausteinen-die-private-equity-performance-konstruieren/

Tail risks and private equity performance

Posted on | by Robin Jakob

We examine the drivers of private equity in response to the fully exogenous Covid-19 shock, employing listed private equity as a proxy for traditional non-listed private equity. This approach enables us to reliably measure firm characteristics and performance in real-time. Listed private equity firms, on average, underperformed significantly during the crisis, with a performance drop ranging from 9.2 % to 43.6 %, depending on the model used. However, there is substantial cross-sectional variation driven by unique firm-level attributes including access to capital, liquidity, transparency, and ownership structure. Listed private equity with better access to capital and higher transparency shows resilience during the crisis, while higher illiquidity and opacity exacerbate the negative effects. This study offers early evidence on Covid-19′s impact on private equity firms, highlighting value drivers and performance dynamics of this alternative asset class during a period of extreme tail risk.

Authors: Hrvoje Kurtović / Garen Markarian
Publication date: 1 December 2023
Published in: Journal of Empirical Finance
Volume/ Ausgabe: Volume 75
Source download link: https://www.sciencedirect.com/science/article/pii/S092753982300124X

Why investors should look again at private equity

Posted on | by Robin Jakob

This document discusses LPX AG’s business strategies and its use of indices in the listed private equity market. It covers the intricacies of listed private equity investments, the challenges of limited data availability in private equity, and the transparency that listed equity offers over traditional private equity.

Authors: Dr. Michel Degosciu, Karl Schmedders, and Maximilian Werner
Publication date: 24 August 2023
Published in: IMD – International Institute for Management Development
Volume/ Ausgabe:
Source download link: https://www.imd.org/ibyimd/finance/why-investors-should-look-again-at-private-equity/

The Risk and Performance of Listed Private Equity

Posted on | by Robin Jakob

Private equity (PE) risk and performance is a black box for investors, as information is quasi-private during a fund’s life. To overcome this issue, the authors use the universe of listed PEs (LPEs) in US exchanges, which permits the measurement of financial fundamen¬tals based on audited quarterly reports, and the observation of share price performance and volatility on a real-time basis. They first show that LPE performance and valuations are highly correlated to that of unlisted PEs, and hence are a good proxy. LPEs constantly exhibit leverage double that of the broader market while showing no distinctive share price performance. Controlling for standard determinants of returns, LPE firms do not outperform market benchmarks. Using COVID-19 as an exogenous increase in tail risk, PE firms grossly underperformed as markets penalized the riskiness and lack of transparency inherent in PE investments. The problems are likely greater in privately held PEs, where performance is self-reported, not audited, and illiquidity periods last up to 10 or 12 years.

Authors: Hrvoje Kurtovic / Garen Markarian / Patrick Breuer
Publication date: 22 May 2023
Published in: The Journal of Alternative Investments
Volume/ Ausgabe: Volume 26, Issue 1
Source download link: https://www.pm-research.com/content/iijaltinv/early/2023/05/21/jai20231191

Does the day of week effect exist in other asset classes?

Posted on | by Robin Jakob

Purpose: This study aims to investigate the day-of-the-week (DoW) effect in globally listed private equity (LPE) markets using daily data covering the period 2004–2021. Design/methodology /approach: To investigate the existence of the DoW effect in globally LPE markets, ordinary least squares regression, generalised autoregressive conditional heteroscedasticity (GARCH) regression and robust regressions are used. In addition, robustness audits are conducted by subdividing the sampling period into two sub-periods: pre-financial and post-financial crisis. Findings: Limited statistically significant evidence is found for the DoW effect. By taking time-varying volatility into account, a statistically significant DoW effect can be observed, indicating that the DoW effect is driven by time-varying volatility. Economic significance is captured through visual inspection of average daily returns, which illustrate that Monday returns are lower than the other weekdays. Practical implications: The results have important implications on whether to adopt a DoW strategy for investors in LPE. The findings show that higher returns on selected days of the week for certain indices are possible.

Authors: Marcel Steinborn
Publication date: 26 April 2023
Published in: Studies in Economics and Finance, Emerald Group Publishing Limited
Volume/ Ausgabe:Volume 41, Issue 1
Source download link: https://www.emerald.com/insight/content/doi/10.1108/SEF-12-2021-0517/full/html