European Private Equity Fund Performance

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: In this study, we evaluate the performance of 395 private equity funds by European private equity firms between 1989 and 2018, using real cash flow data gathered from Preqin. The evaluation involves using absolute- and relative performance measures. We adopt the public market equivalent framework to measure relative performance, which compares the returns of a private equity fund with a reference benchmark. We also test if fund-characteristics, such as size, sequence, country and fund-type, have a significant impact on performance. The main empirical findings are: 1) European private equity firms outperformed the S&P 500 by 5.6% 2) Buyout funds significantly outperformed Venture capital funds 3) Greece is the only country in the sample that systematically underperformed 4) First-time funds tend to experience lower returns than follow-up funds 5) European Private equity firms experienced persistence in returns, where previous fund performance significantly impacted subsequent funds' performance for a specific partnership

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