Risk, returns, and biases of listed private equity portfolios

This is the first empirical paper investigating a comprehensive sample of listed(i.e. publicly traded) private equity companies, covering 287 companies in thetime period 1986 to 2003. After imposing liquidity constraints, and aftercorrecting for non-surviving vehicles, we get a sample of 114 instruments. Therisk and return characteristics of three portfolio strategies, two partiallyrebalanced and one fully rebalanced, are compared. We moreover addresspotential biases resulting from thin trading, the bid-ask spread, and sampleselection. We show that the adjusted performance figures differ substantiallyfrom standard estimates. But even after correcting for these biases, we find ahigh risk-adjusted performance of this asset class before 2000, and dramaticdifferent results between the three indices if we extend the time period to 2003.Listed private equity, Private equity, Performance biases