Organizational Forms and Risk in Listed Private Equity

The Journal of Private Equity, Vol. 13, 89-99, Winter 2009

with Florian Herschke

Abstract: This paper investigates the stock performance of listed private equity vehicles which are grouped into subsamples according to their organizational structure. We identify 274 liquid listed private equity entities in the period from 1986 to 2008. Listed private equity shows an aggregate Dimson beta of 1.7 without any significant excess return on a value-weighted basis in an international CAPM context. Entities differ strongly dependent on their organizational form. Market risk is high in internally managed vehicles but low in externally managed ones. We conclude that different sources of cash flow such as management fees and carried interest can account for these risk characteristics. Precautions must therefore be taken when using listed private equity as a proxy for traditional private equity funds.

Available at SSRN.

latest version: March 2009